What Role Does a Loan Settlement Agency Play in Debt Settlement?

Loan settlement agencies have multi-faceted role, the details of which are listed below:

• Debt reduction and clearance

Loan settlement agencies actively engage with creditors to reduce the total outstanding loan number of borrowers. This enables borrowers to pay a reduced amount at a lower cost than was originally applicable. As a result of this process, borrowers have to pay a lower outstanding amount which relieves them of a tremendous financial burden. They play a key role in negotiating the terms of settlement with the lenders. Sometimes, the reduction may be as high as 30%-40% of the outstanding loan amount.

• Do a thorough debt analysis

Analysing the outstanding debt at hand, the terms, the loan structures, the interest rates payable is necessary to work out the loan settlement strategy. 

Sometimes, even AI and advanced tools are used to work out an in-depth analysis and arrive at a feasible solution.

• Improving cashflows

Borrowers’ cashflows improve as their debt and interest burden are scaled down. Otherwise, penalty interest, fees and other charges drastically reduce the available cashflows for borrowers. As the result of reaching loan settlement, the improved cashflow streams can be guided towards paying larger loan instalments, meeting important financial commitments like living expenses and even creating a small emergency reserve. The borrower’s financial distress is no longer overwhelming.

• Avoiding legal action and bankruptcy

As an extreme measure, lenders even initiate legal action against delinquent borrowers which causes mental stress and deprives you of peace of mind. Loan settlement agencies will help you to evade such actions by starting a dialogue with the lenders and try to achieve a successful solution by reducing penalty interest and even secure a lower outstanding amount for their borrowing customers.

• Freedom from mental stress and achieving peace of mind

Unpaid, outstanding debt can result in mental stress and lack of peace of mind. By the very act of reducing the outstanding balance; whether it is loan interest and penalties or outstanding loan amounts, loan settlement companies can instantly bring about a reduction of stress and mental tranquility. The constant worry about installment payments, interest payments on due date, the delicate balancing act of managing multiple loans all result in destruction of peace of mind. 

• Credit Repair and Rebuilding

Whenever a loan settlement takes place, there is an adverse effect on the borrower’s credit score in the short run. Loan settlement agencies work to minimise the impact on the credit score and help in rebuilding the score by making on-time payments of future installments, reducing outstanding credit balances and using credit responsibly. As and when the borrower becomes eligible for new credit, loan settlement agencies enable them to navigate their financial journey with responsibility. 

• Customised settlement plans

Each individual borrower’s financial circumstance is different and, hence, debt settlement plans must be carefully structured so that it is specially tailored to match their individual financial circumstance. After all, there is no one size fits all solution available to meet the requirements of all borrowers. The extended credit plans, and the reduction in penalties are all designed to meet every individual’s unique circumstance so as to enable them to pay bills on time, without exhausting their credit, thus enabling them to maintain financial prudence. Pre and post litigation assistance is also part of the package. 

• Create goal-focused savings in the long run

Through financial planning, post settlement, they can create long term savings to meet their various goals. This enables borrowers to cultivate financial discipline and establishing financial resilience. Financial counselling is also provided to enable the borrowers to navigate their debt management journey.