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Failure to Repay an Unsecured Loan
Unlike a secured loan, where the collateral is stipulated, an unsecured debt is risky and problematic to the lender because there’s no collateral attached to it.
The consequences of failing to repay an unsecured debt can range from frequent calls from collection agencies to lawsuits. The nation’s 3 credit report reporting agencies receive a report from the lender of a defaulted or delinquent loan notifying them that the borrower is delinquent, which in turn will severely lower the borrower’s credit-worthiness quotient, known as the FICO score. It is more difficult to obtain credit with a low FICO score and borrowing any possible credit becomes costlier.
With the concern that a poor credit history reflects a lack of character, employers also use credit scores in hiring decisions as well. It can take as long as seven years for the failure to repay a debt to disappear from a credit report.
Debt Consolidation vs. Debt Settlement
Debt consolidation and debt settlement are two vastly different solutions for consumers struggling with unsecured and credit card debt. Debt consolidation is an act of combining different debts from several creditors and taking out a single loan to pay them all, generally at a lower monthly payment and reduced rate of interest. Debt settlement is when you negotiate with your creditors to settle your debt for less than what you owed. When used properly, either strategy can help you save money and get out of debt sooner.
Negotiate Debt Balance
Negotiate your debt. The first step is to assess your credit card debt so you can understand how much you owe. Explore your options and understand what is available and how much you can afford to pay. Also understand the risks, because all the negotiation options come with downsides, and it’s important for you to be aware of them. Call your credit card company and ask for the department that handles debt settlements or collections. Negotiate the best deal you can and make sure you get the terms of the new deal in writing.
Credit Card Debt Settlement
The odds are high that your credit card company will want to make one of the following arrangements, if the idea of a debt settlement is entertained by them: A Workout Agreement, A Lump-Sum Payment Agreement, or A Hardship Payment Agreement. That way, the entire debt on their income statement won’t have to be charged off by them, their stocks won’t fall, management won’t get lower bonuses, and perhaps even dividend payments to shareholders won’t have to be reduced. They would lose everything if you file for bankruptcy.
Student Loan Debt
Student loan debt has become a burden on the U.S. economy that is accelerating so fast. More than 1 in 4 American adults have student loan debt. In the U.S. there are 44.8 million people with active student loans, mostly under the age of 60. For 26% of younger adults under age 60, paying off student loans is a common challenge. Four years ago, the Federal Reserve Bank of New York said that borrowing for higher education had doubled in just eight years and that student loan debt rose for the 18th consecutive year.
What Type of Debts Can be Settled?
Debt settlement is for unsecured debts without a physical asset attached. Some types of unsecured debt do not qualify. These debts are private student loans in default, credit card bills, both current and past, medical bills, department store cards, signature loans, old judgments, personal lines of credit, old repossessions, personal loans and other unsecured debts. Secured debts, which are federal student loans, car loans, home mortgages, credit union debts and other secured debts cannot be settled with debt settlement.
At the Franklin Legal Group, we believe there is a better way to become debt free. A more seamless, less stressful way where you make comfortable payments that satisfy your creditors and lead you to financial freedom. We’re obsessively passionate about it, and our mission is to help people achieve it while saving lots of time and money. We focus on accompanying you every step of the way in your journey. We become a family and look out for your best interests like a mother to her child. All you have to do is believe in us and give us the opportunity to help you. We’re excited to simplify debt repayment for everyone through our dedication and commitment, our experience, expertise and empathy. We always care. Call us for your FREE phone consultation and you will see. Worrying won’t make your debt disappear; you must take action.
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