Benefits Of A Debt Settlement Loan

A debt settlement loan is a loan you take out to pay off debts. Because it is a debt settlement loan, instead of a debt consolidation loan, generally you will use the proceeds from this new loan to make a one time lump sum cash offering to your creditors. This one time lump sum is often for a lower amount than your debt is actually worth. The creditors may take this reduced amount in order to ensure they actually get their money if they believe you are likely to default.

Benefits

There are several benefits to a debt settlement loan:

• If you are able to settle your debt for less than what is owed by offering a one time lump sum payment to your creditors, you can save money on the total amount paid back. This is extra cash you can use to accomplish other financial goals, pay off other debts, or jump start your savings.
• When you apply for a debt settlement loan, you usually will be able to apply for a loan that has more favorable terms than the debt you currently have. Some debt is quite high interest, such as unsecured credit card debt. If you've been late on payments or otherwise defaulted in your agreement with your original creditors, your rate could be as high as 20 percent or more if you are paying a penalty rate. Likewise, many store credit cards have rates at 20 percent or higher. If you are able to consolidate into a loan with lower interest, then you will end up paying back much less over the life of the loan.
• You can change how you pay. When you take a new loan to settle debt, that new loan may have a longer repayment term than your existing loans. This will lower your monthly payments, making them more affordable and helping you to get a handle on your finances as you'll have extra cash each month. In addition, if the interest rate on your debt settlement loan is lower than the interest rate on your original debt, then this too can contribute towards lowering your monthly payments.

Getting Legal Help

If you are considering a debt settlement loan, speak to an experienced debt settlement attorney. Your attorney can help you to choose a loan that has the most advantageous terms in your situation. He can also help you to negotiate with your creditors to accept a settlement payment, thus helping you to save more money on what you pay back.