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When the times are tough financially and your business is on the rocks because of debts, settling them with your creditors may be the only option remaining. However, before making that decision, you want to make sure that it is the right decision to make. It is worth noting that debt settlement affects your credit score, making it difficult for you to qualify for other loans in future. As such, if there is another option, you will want to look into that first.
To know for sure that you are not only making the right choice for your business but also ensuring that you won't be in the same state again, the following are some of the factors to consider.
How did you end up in debt?
The first thing to look into, as much as you may want to assume, is the reason why you ended up in debt in the first place. What led to you looking for company debt help? This is aimed at ensuring that you do not find yourself in debt in future. Make the necessary changes on your expenditures including avoiding those that can be avoided. The last thing you want is to keep running for debt consolidation every now and then.
The rate of interest
When negotiating with your creditor to forgive some of your outstanding loans, the main idea is to reduce the rate of interest on the credit. This saves money both in the short and long term. That makes it essential to ensure that you are getting a reduced rate before signing the settlement deal. Moreover, it is aimed at enabling you to make the repayment, especially when you are not financially stable.
So if you are faced with the option or have the ability to negotiate for lower rates, do not hesitate. On the other hand, when settling for a better rate of interest seems like impossibility, it would be better to repay your loan instead of settling.
Identify the problem
When considering debt consolidation, it is an important to note where the problem is with the repayments. One of the most common problems is multiple repayments. For many people, their busy schedules and a lot of loans that require payment is the reason for defaulting in the repayment of specific loans. When it has proven difficult to keep track of all your due dates, then negotiating with your creditor to allow for a one-time lump sum settlement would be wise.
You may consider negotiating for a future repayment date if you are expecting cash in the foreseeable future. That way, you avoid being recorded as a defaulter during the period you are not repaying – note, though, that interest on the loan is accumulating.
If loan consolidation is a whole new thing to you, it is advisable that you seek assistance from professionals on the best arrangement. You could opt for a debt settlement company or a consultancy firm offering the same services. Be vigilant though since the market has its share of fraudsters who will promise better repayment terms.
Settling your debt may seem like the best thing to do, but that is not always true. Considering the factors highlighted in this article will help you make the right choice.