THE IMPORTANCE OF HIRING PROFESSIONALS IN LOAN SETTLEMENT
INTRODUCTION
Before understanding the importance of hiring professionals for loan settlement let’s see what a loan settlement process is. Loan settlement is an agreement between the borrower and the lender, where the borrower repays a portion of the debt to the lender which is usually less than the outstanding amount of the loan, as a final settlement. Loan settlement takes place in certain cases where the borrower is unable to repay the whole outstanding amount, he has borrowed due to some financial constraints like medical emergencies, job loss, or some unforeseen event. Loan settlement contributes to your financial steadiness by reducing your burden of debt.
DIY LOAN SETTLEMENT
Do-it-yourself loan settlement is when the borrower without any outside help negotiates and settles the loan with the borrower all by himself. It is a desirable option when the borrower doesn’t want to further increase his financial burden by hiring professionals and wants to save time. Through DIY loan settlement the borrower can work independently focusing on his priorities and needs and at the same time work at his own pace.
However, this can be challenging due to the complex nature of the loan settlement process. It is a time-consuming process and mentally very straining. The borrowers may not have the right knowledge and skills to negotiate and deal with the lenders and due to this, the outcome can leave them dissatisfied.
DIY loan settlement is a good option when the borrower has the right knowledge and can dedicate his time and effort toward the settlement process, however, when the settlement process is very complex involving a lot of rules and compliances, legal complexities, and tough negotiations, this is when professionals come to the rescue.
CHALLENGES OF LOAN SETTLEMENT: HOW CAN PROFESSIONALS HELP
1. FINANCIAL PLANNING AND ANALYSIS OF RISK
Professionals carefully analyze the borrower’s present financial condition by assessing the income level, savings, expenses, assets, and liabilities. By doing proper financial planning, professionals can identify the areas of weakness and strengths which will provide a strong base for the negotiations. By scrutinizing the potential risk, professionals address the problems in a plan that ensures maximum benefit for the borrower in the settlement process and also in the long run.
2. FOCUS ON IMPROVING CREDIT SCORE
A loan settlement process can have a negative impact on the credit score of the borrower. A credit score (1) is a three-digit number that reflects your creditworthiness. It is calculated taking into consideration your credit repayment history among other factors. The higher the credit score the better the chances of getting loans. It also helps the lender assess your repayment capacity. However, a loan settlement in your credit history will critically diminish your credit score which will cause problems in receiving future credits. After the loan settlement process, the transaction is marked as “settled” (2) by the credit agencies. This is considered as bad financial behavior by the credit agencies.
Professionals can help to rebuild the credit score and improve it by focusing on repaying any outstanding debt, providing valuable pieces of advice on cultivating good credit habits, and dealing with the lender and the credit agencies to help the borrower.
3. HELP IN BUILDING A FINANCIALLY RESILIENT FUTURE
Professionals not only help in the negotiating and settlement but they also help the borrower to recover financially. This is done by carefully examining the borrower’s past financial mistakes and present financial condition. They can educate the borrowers and help them with building emergency funds, healthy investing and credit habits, savings, and budgeting. Financially educating the borrowers will empower them to make sound decisions and this will ensure that the borrowers can comfortably recover from their current financial hardship and start a better life with a stronger financial base.
4. MANAGING LEGAL COMPLEXITIES
It is very difficult for the borrower to handle the legal aspects of the loan settlement process all alone. It includes a lot of paperwork like loan agreements and evidence to prove the inability of the borrower to repay the loan like the medical bills, unexpected expenses, etc. It is very important to understand these documents.
Along with that understanding the law is a difficult task because of its vastness and diverse nature. Professionals can help the borrower by understanding the situation and following the rules and regulations to ensure a fair settlement.
5. EFFECTIVE SETTLEMENT PROCESS
During financial hardships, borrowers go through a lot of stress and this impacts them in a negative way during the negotiation process. They become vulnerable to repaying the money and lenders take advantage of them. This leads to unfair settlement and dissatisfaction on the part of the borrowers.
Professionals can save borrowers from this stress by handling all the work that comes with the loan settlement process like dealing with lenders, legal authorities, paperwork, and negotiations.
6. EXPERTISE IN NEGOTIATIONS
Professionals who have the industry knowledge and the right expertise will prove to be valuable in the negotiation process. The borrower may not have the negotiating skills required for the settlement process and with the mental stress it can be very challenging to settle the loan. Professionals have tie-ups with many stakeholders and lenders which provides an added benefit during the negotiations. With their negotiating power professionals can bring desirable terms like reduced interest rates, bring down the settlement amount, and debt repayment plans which will help the borrower to become financially stable.
TIPS ON CHOOSING THE RIGHT PROFESSIONAL
- When it comes to choosing the right professionals, borrowers can do so by doing research on various companies and professionals available in the market.
- Make sure to check the reviews and credentials of the professionals to ensure that your settlement process will be in the right hands.
- Decide how much you can afford to hire the professionals and search for options accordingly.
- Always be open and honest in communication so that you can convey your needs and problems and it will help the professionals understand your situation and make your settlement process a seamless experience.
CONCLUSION
Loan settlement can be an exhaustive process with a lot of intricacies. The experience, negotiation skills, and legal expertise along with a focus on financial recovery by hiring professionals can help the borrowers go through a smooth settlement process. DIY loan settlement can be an attractive option when the borrowers want to save time and money and do things on their own accord. However, emotional stress and a lack of relevant skills can lead to unfavorable results. Hiring professionals will ensure a customized and seamless settlement process as desired by the borrowers.
This article is written by Purbasha Parui, a 1st-year law and finance enthusiast from BMS College of Law, Bangalore.
