See if you qualify

How To Qualify For Debt Settlement Requirements And Eligibility

A debt settlement strategy isn’t suitable for everyone but as it comes with a flexible nature, it applies to a wide range of different financial challenges. For example, if you don’t want to declare bankruptcy then it’s best that you get out of debt as soon as you can. In case you don’t have the funds to pay off your debt and your expenses are exceeding your income then debt settlement really is the solution.

What Debts Can Be Settled?

In order to ensure that your loan settlement application is accepted, it’s best to first study whether or not you qualify for it. For starters, you need to know that not all debts can be settled, only a few qualify;

Only unsecured debts can be settled. If you have a collateral for your debt and have taken up a secured loan then it cannot be settled. Only the deficient amount of your secured debt is eligible for debt settlement after the repossession of your collateral.

Excluded Debts

Under the Personal Insolvency Act 2012, there are certain debts that cannot be settled and can’t be covered by a DSA either;

What Makes You Eligible For Debt Settlement?

The debt settlement market has been growing through leaps and bounds over the past few years. As per report, the market is further expected to grow by USD 5.07 billion with a CAGR of 10.3% between 2024 and 2028. The growth in the market shows that more and more people are now facing financial challenges and they are under great burden of debts. People opt for debt settlement especially because this proposition can save them time and money.

When you settle a debt, you basically make partial payment of the debt you owe and the rest of it is forgiven by the credit and it all happens under certain circumstances so you first need to be sure that you’ll be approved for it.

Now that it’s clear that you can only settle unsecured debts, there are a few more factors that determine whether you can apply for debt settlement or not.

1-Do You Really Have A Legitimate Financial Challenge?

Loss of income, medical emergency, a divorce or separation, all these things qualify as authentic and legitimate reasons to opt for debt settlement. Any of these things can happen to anyone without their fault. However, if you just don’t feel like paying your loan back even though you can then it’s obvious that your creditor will find it out and reject your proposal. If you are in a very tough financial situation where you don’t want to declare bankruptcy then yes, talking to your creditor and requesting him to waive off some percentage of your loan is the wiser decision.

2-Are You Committed To Becoming Debt-Free?

Debt settlement is an aggressive approach and it sure will benefit you when you don’t have any other option left. It won’t just cut down the interest for you but it will also reduce your balance that you owe. The whole idea of settling your loan amount seems like the easy way out but it really isn’t and chances are that the road will get a little bumpy for you.

In order to get out of debt, you really need to commit to the process and honour the agreement once your creditor agrees. If things work out the way you want then debt settlement really can help you overcome your financial challenges at a faster pace and at a lower cost. Whether your agreement comes with a lump sum amount or a payment plan, you have to stick to it and ensure timely payments to settle your debt and sort your financial situation as early as possible.

3-Are Your Debts Primarily From Credit Cards?

You can get some good discounts with credit card debt. If it’s an unsecured loan, you can easily negotiate with your creditor. Whether it’s repossession deficiencies, department store credit, utility bills, line or credit or a financing contract, all you need to do is to come up with a solid proposal to convince your credit that you really can’t pay the loan back. With an authentic reason, your application will definitely go through.

4-You Are Under Significant Amount Of Debt

If you have taken up a loan under $1000 then you do not qualify for debt settlement. This debt relief option only applies to people who have a significant amount of loan to pay that exceeds thousands of dollars.

5-Have You Been Delinquent On Your Payments?

Your repayment history needs to show delinquency to get accepted for loan settlement. This is the first thing your creditor will check if you’ve had a history of late or missed payments. Here, your 5 to 6 months repayment record will be considered. When you’ve been delinquent, your creditor might consider settling the debt as partial payment is still better than no payment at all.

6- Proof Of Your Income And Your Budget

It just makes sense that no creditor would be willing to forgive a percentage of your loan amount without acquiring all the important details. The lender has all the right to ask for proof of your income and your budget too to check whether you really are in need for a debt settlement or not.

7-Existing Savings

If you have existing savings in your account, that can really come in handy for you because mostly creditors opt for a lump sum amount to settle. For this, they’ll check if you have funds in your savings account or any liquid asset. If you’ve saved several thousands in your account that aren’t for your retirement purposes then yes, debt settlement will just be the right option for you.

There’s Only One Way To Know

If you meet the eligibility criteria for debt settlement, are facing real time financial challenges, don’t have any income or can’t afford the repayments then you should definitely talk to your creditor. In debt settlement, you’ve got two options, whether to do it yourself or to save yourself from all the hassle and fear or rejection, hire a third party.

Hiring a debt relief company can really work wonders for you when you are dealing with such a critical situation. These companies have years of experience and they know how to professionally deal with creditors to convince them to settle debts. They’ve done it before so their chances of acceptance are more than when you do it yourself.

The only way to know whether your application will go through or not is to just talk to the creditor and present a solid proposal. Or before you start, it’s best if you talk to a professional for consultation and ensure that you are eligible for this debt settlement arrangement.

FAQs

Q1. What Does Debt Settlement Do To Your Credit Score?

Debt settlement can have a negative impact on your credit score. After settling, you will see a drop in your credit points and it will stay on your report for 7 years. However, the damage is not permanent and you can improve your score with time.

Q2. What’s The Required Amount To Qualify For Debt Settlement?

In order to qualify for debt settlement, you need to be under a significant amount of loan. Ranging from $5,000 to $10,000, the higher your debt, the better are your chances at debt settlement.

Q3. How Much Does Debt Settlement Cost?

If you are planning to settle your debts through a debt relief company, know that it won’t be free and you’ll be charged around 15% to 25% of the amount you owe.

For example, if you owe the creditor $10,000, your debt relief company will charge you 25% of it which makes $2500. You’ll have to pay this amount once your debt is settled.

Q4. What Is The Risk Of Debt Settlement?

The one downside of debt settlement is that it will affect your credit score for a long time. A poor credit score means you won’t be able to get a loan, a credit card or even a house easily in the future.

Q5. How Long Does Debt Settlement Take?

The timeline for settling your credit card debt depends on different factors and your financial situation. However, on average, debt settlement takes around 24 to 48 months.

To become debt-free and gain your financial control back, try Mountains Debt Relief for the most efficient and reliable services ever. Contact Now!