Debt is an ever-growing menace in today’s modern era, particularly because of the increased use of credit and debit cards. The world is moving at such a high pace and, more often than not, economies face high inflationary pressures, leading consumers to acquire loans and mortgages to make ends meet. However, at the end of their spending journey, most people find themselves owing massive amounts of money with no savings or any other funds that could be used to pay back creditors. The longer people wait to pay back arrears, the more interest becomes due. Often, such dire circumstances lead several individuals to declare a state of bankruptcy. However, people often forget that there are other ways for them to deal with their financial obligations. One such way is debt settlement.
The term debt settlement, often called debt arbitration or debt negotiation, refers to a way through which individuals can reduce the amount of money they owe. The debtor and creditor negotiate and agree on a balance that is less than the originally owed amount but will be regarded as complete payment. The borrower is required only to pay the newly agreed-upon sum and finds himself relieved of a greater financial burden.
Like every action has its consequences, advantages, and disadvantages, agreeing to settle your debts also has its pros and cons. Before jumping straight to hiring a debt settlement company or talking to your creditors on your own, it is advisable to evaluate the following benefits and drawbacks of negotiating with your trade payables.
Advantages
The biggest advantage that debt settlement has to offer is that you now have to give a single, lower amount of monthly payments. It not only eases your financial burden but is likely to save you money in the long run as well. Sometimes, people can acquire a lot of success in negotiation, leading to a thirty to seventy percent reduction in their debt.
Moreover, enrolling in a debt relief program can result in interests and fees being eliminated from the balance in arrears. It further makes it easier to afford the burden of the remaining debt.
Furthermore, if you hire a debt relief company to negotiate on your behalf with your lenders, it makes your life easy. You are no longer harassed at odd times by different people, calling and asking around for you and demanding their money back.
Disadvantages
The biggest con attached to debt settlement is damage to your credit rating. What’s more is that the default will be visible on your record for seven years.
Another possible drawback is that if you hire a company to settle your debt, it will charge you a fee. These firms often purchase debt settlement leads, which means the fees charged to you may be very high so much so that the benefit of debt settlement is lost.
Moreover, when you’re ignoring your creditors and waiting for the company to settle the obligations, credit bureaus will be receiving updates from your lenders who will be reporting late payments in your name.
The very first thing to do is to create a family budget. It is the time when your family is about to have a new member, and a new member means extra costs and expenses. When you create a budget, mention all those items which will be required once the baby arrives. People overlook a lot of things like increased healthcare expenses and increased clothing costs (diapers and all other baby clothing items). There is also the cost of the child’s health. Adjust all these costs into your budget so that your expenses do not exceed your income. To make this certain, you will have to reduce the amount allocated to luxuries such as movies, entertainment, dining out, parties and picnics.
Before the arrival of your baby, you need to discuss with your spouse about the kind of baby products you will use. The market is full of expensive as well as low-cost products. If it is your first baby, you might want to get the highest-quality products to ensure your child’s safety and well-being, but be wise. Ask your friends and other family members who already have babies for their guidance. Ask them about the products you should purchase. Do not spend a lot of money on the products which you will use for a short period. One way to reduce the cost is to ask friends and family members if they have any baby products which they do not use.
Many companies and firms have a maternity or paternity policy. If you are about to have a baby, there is still time. Investigate the paternity policy of your company. When you have a baby, one parent might have to leave work for some time while the other works. You should see if your company offers extra hours of work if you are going to be working so that you can make up for the reduction in your total household income. You need to always be prepared. Create a budget which will help you get through this situation.
