A partial settlement is a way of negotiating with your creditors to settle your debts and reducing the amount you owe, since a partial settlement is usually agreed to be an amount that’s less than the total amount of your debts.
If you’re considering a partial settlement, it’s important to understand what this option really entails so that you can avoid some of the common pitfalls along the way.
In this post we’re going to cover what a partial settlement is in more detail, so that you can make an informed decision about whether or not it’s right for you.
What is a partial settlement?
A partial settlement is when you negotiate a settlement with your creditors so that you can reduce the amount that you owe.
However, instead of making an offer that is more than what you owe, you make an offer that is less than what you owe.
A partial debt settlement can help you to reduce the amount that you owe, meaning your debt is paid off quicker, and that your creditors can’t come after you once the final balance has been paid on the agreed partial settlement amount.
Risks of a partial settlement
One of the main risks of a partial debt settlement is that you end up defaulting on your agreed payments, which will void any agreement you have and can adversely affect your credit rating.
There’s also a risk that your creditors will refuse to accept your partial settlement offer, meaning you still have to pay the full amount.
Benefits of a partial settlement
One of the main benefits of a partial settlement is that it can help you to save on interest.
If you had to take out a loan to pay your debt, you would have to pay interest on that loan, which could lead you down a path of more debt.
Although a partial settlement will still show on your credit file, it will show as being partially satisfied, so over time, if you don’t take out more credit and make your payments on time, this will slowly help you re-build your credit score and get better interest rates.
Debt can be a daunting and scary thing to deal with, but when left it will only get worse, so it’s best to face it head on, and we’re here to help if you’re looking for a way to get it under control.
Debt is not something you have to deal with on your own. If you’re looking for a way to get your debt under control and think a partial settlement could be a potential solution for you, get started today by using our free online debt advice tool or contact our friendly team of debt advisors who will be happy to discuss your options.