It can be stressful to be having money problems. It is challenging to know what to do when bills pile up. In the UAE, this issue affects a lot of people.
They wonder if they should settle their debts or stop paying. Debt settlement is better option than just stop repaying your debt. If you settle debt, you owe nothing to the lender in the end. However, if you don’t settle and also don’t repay your debt, the lender might sue you.
Let’s talk about debt settlement and see which might be better.
What Is Debt Settlement?
Requesting a debt settlement from your lender entails offering them less than what you owe. It is a method of paying off debt for a portion of what it is worth. This can be helpful if you are really struggling to pay.
How Debt Settlement Works
- You stop paying your bills: This means you pause payments on the debts you want to settle. It’s a risky move because your creditors might not be happy. Your credit score will likely drop too.
- You save up money instead: While you are not paying your bills, you put that money aside. The goal is to save up enough to make a good offer to your creditors. Usually, this takes a few months or even years.
- You or your business speak with your lenders: It is time to negotiate after you have saved up some money. Either you or a debt settlement firm can handle this. They will inform your creditors of your circumstances.
- You offer a lump sum that’s less than what you owe: This is the key part. You propose paying a portion of your debt in one big payment.
- If the lender agrees, you pay the settled amount: If your creditor accepts your offer, you pay the agreed amount. This usually needs to happen quickly. Once you pay, the creditor considers the debt fully paid.
Pros of Debt Settlement:
- Pay less than you owe.
- Get out of debt faster.
- Stop collecting calls.
- Avoid bankruptcy.
Cons of Debt Settlement:
- Your credit score will go down.
- You might owe taxes on the forgiven debt.
Which Is Better The Better Option – Debt Settlement or Stop Repaying?
A debt settlement is usually better than not paying at all. Here’s why:
- It ends the debt: With the settlement, your debt is gone once you pay. If you just stop paying, the debt hangs over you.
- Less damage to credit: A settlement hurts your credit, but not as much as not paying at all.
- Legal protection: Once you settle, the lender can’t sue you. If you don’t pay, they might take you to court.
- Peace of mind: Settling debt lets you move on. Not paying means always worrying about collectors.
- Future financial health: It’s easier to rebuild after settlement than after years of not paying.
Conclusion
In most cases, debt settlement is better than not paying, as it can help you move forward. Not paying might seem easier, but it causes big problems later. Whatever you choose, get information first. Talk to experts if you can, and get out of this easily.
