Whats the difference between loan modification and debt settlement?

Mon, 09 Mar 2009 01:58:43 GMT

Debt settlement typically involves working with a professional debt settlement company to negotiate with the creditors to whom you owe debts. Your creditor may, for example, accept a one-time payment of 20 – 75% of your total debt and forgive the remainder of your debt. Loan modification, however, simply changes the terms of your loan to make payments more affordable. It does not reduce the amount of money that you owe to the creditor.

Which debts are most likely to be settled for less than payment-in-full?

Tue, 29 May 2007 21:19:00 GMT

Most unsecured debts can be settled. An unsecured debt is a debt where there is no collateral. Unsecured debts include medical bills, credit cards, department store cards, personal loans, collection accounts, student loans, amounts remaining after foreclosure or repossession, and bounced checks. There are a few creditors who will never compromise, but most will take a lessthanfull payment as settlementinfull to close a troublesome account. (Utility companies, however, rarely settle for less than the full balance.)

Secured, collateralized debts (such as a home or automobile) are an entirely different story. If the creditor can simply repossess the property, why should he negotiate? You can often renegotiate a short payment relief with a secured debt but don't attempt to settle the account while you still possess the property.

Also, the creditor must have a good reason to want to settle. If the account is paid current and there is no recent history of late payment, it will be difficult to convince the creditor that it is in their best interest to settle. (This should not be read as a recommendation to stop paying bills that are current. If you stop paying your current bills, you will almost certainly make your credit situation worse.) Perhaps bad credit is not an issue for you at this point and you feel you must stop paying your bills in order to settle them and get back on top of your debt load. If this is the case, you make that decision at your own risk. In other words, don't do it.

Whats the difference between loan modification and debt settlement?

Whats the difference between loan modification and debt settlement?

Which debts are most likely to be settled for less than payment-in-full?

Whats the difference between loan modification and debt settlement?

Whats the difference between loan modification and debt settlement?