Why Should I settle My Outstanding Debts With The Creditors?
Many debtors take the decision to avoid dealing with debt. They hide from creditors, avoid taking phone calls from collection agencies, change phone numbers often, switch jobs frequently and may even work for plain hard cash. They assume they can duck and hide from creditors and collection agencies forever. However, in today’s technologically networked world, it is getting harder to avoid paying the debt owed. This is why you should consider settling your outstanding debts.
Here are a few reasons more why you should consider this option.
- Creditor can Sue and get a Judgement
A creditor can start legal action against you. In such a situation, you will get a court notice informing you of the action taking place against you. If the court rules against you, you may have to pay the court costs, legal fees, pre and post interest over and above the balance owing to the creditor.
- The Debt will remain for Many Years
Even if the creditor doesn’t sue, you still have to deal with the debt. We have seen collection agencies trying to collect debts which are many, many years old. The credit system is tilted more towards the creditors in Canada. So the debtor is fighting an uphill battle to get this removed. Some have been successful, but for a few successful people there are many more who have their life affected because of that.
- Raising Credit or Cash could be Difficult
Debts reported as not being paid to the credit reporting agencies will have a negative impact on the credit score for the next 6 years. When the debtor applies for new credit, prospective lenders will look at the credit score and make a decision on whether to lend and what should be the interest rate. So in such a case where debts are reported as not paid, the score will be low and hence, it will make it more expensive for the debtor to borrow money. Due to your own low credit score, the lender agency will charge you a high credit.
- Credit rating is Affected
Sometimes an employer wants to have a look at the credit report as part of their hiring process. This might apply to positions where dealing or coming in contact with any type of cash is involved. Sometimes in government positions also, there is a requirement of credit rating. Utility companies are also seen to ask for deposit from people who have no credit or bad rating. A good credit rating may also get some benefits from insurance company.
Having good credit rating will be beneficial in many areas of life from employment, insurance to finding a roof over your head.
These are the reasons why you should never allow debts to remain unpaid for long. In no way am I saying that we should continue making those atrocious minimum payments. If you have fallen behind on making full payments on your debt for some time, then the chances are that you may never be able to make a full payment. The best way, I think it can happen, is when you happen to win a lottery or get an inheritance. Continuing minimum payments is as bad for the financial health as letting debts to remain unpaid. It is wise to get your debts consolidated or reduced which prevents financial problems in the future.