Payday Loans Debt Consolidation

Repair Your Credit Through A Payday Loan Debt Settlement Agreement

A payday loan debt settlement agreement does not just help you pay off all your debts, but it also provides you an opportunity to improve your credit score. But, things will very much depend on how you use it. If you are not careful enough and do not do the basic homework in advance, a debt settlement program for payday loans can significantly damage your credit. Following are some of the basic things that you must keep in this regard.

How Does A Settlement Program Work?

Lenders usually agree to a payday loan debt settlement agreement in very specific cases, such as in a situation where the borrower is going through severe financial hardship, such as because of an illness or job loss. In such cases, lenders allow the borrower to pay a reduced amount of money in full and final settlement of the debts. You have to go through a very complex process to negotiate such an agreement with the lenders. Since you are already overstressed, it may be a wise idea (though not mandatory) to hire an experienced debt settlement agency to assist you with the process. In fact, when you hire such an agency, they do everything on your behalf. You no longer need to talk to your creditors. The agency will first review your financial situation and then prepare a detailed report. They will then convince the payday loan companies in question that you are unable to pay off your debts unless you are offered a settlement plan. The agency will also work their best to negotiate the best settlement plan in your favor. In general, you can expect to pay back somewhere around 30% to 70% of the overall outstanding debt as a full and final settlement. The agency charges a commission for their services. Their commission is usually determined at a certain percentage of the amount of money they help you save on your debts.

How Can You Improve Your Credit Score Through A Settlement Plan?

You can get an excellent opportunity to improve your credit score through a payday loan debt settlement agreement if the agreement requires the lenders to report the debt payments as “paid in full”, not as “paid in settlement”. If your payments are reported as “paid as per a settlement plan”, it will seriously hurt your credit score. Therefore, you are advised to sign such an agreement only after reviewing the terms of payment reporting to credit bureaus. It is very important for you to understand that debt payments contribute to 35% of your credit score. Therefore, positive entries regarding debt payments will let you see a significant rise in your FICO score.

Overall, a payday loan debt settlement agreement can be very helpful in getting you back on the right financial track. Just be a little careful in choosing the best settlement company.

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