How can debt settlement affect your credit?

Sometimes people get so much consumer debt that they turn to the more drastic options, such as bankruptcy. Unfortunately, they make this decision because they are poorly informed and do not know about other options or solutions that would be available to them. Know that in some situations, people have so much debt that bankruptcy is their only option. But if that’s not your case, there are other options you should consider.

That said, it is extremely important to remember that you should choose the option that will be best for you and your credit. Bankruptcy is the solution that affects your credit the most. Thus, it is important to think carefully about all available debt settlement solutions and how they could affect your credit.

Of course, not all debt solutions are created equal, and each will affect your credit rating to a different degree. If bankruptcy is the most damaging to your credit rating, if not, a financial follow-up would be the least worse. While a financial follow-up is enough to help you reclaim your debts, there is still the debt settlement step.

Debt settlement 101

To put it simply, the purpose of a debt settlement program is to help you repay less debt than you really owe. This option is desirable for people who have more than $ 10,000 in debt but not enough to file a consumer proposal or declare bankruptcy. Working with a financial advisor is a good way to assess whether or not a debt settlement program is the right option for you. In making your choice, be aware that you will have to make a lump sum payment to your creditors. Here, payments are not usually an option; thus, it is more beneficial for you to start saving.

Debt settlement and your credit rating

The extent to which a debt settlement on your credit rating will depend primarily on your situation. You want your creditors to write off a large amount of your debt in order to have a less negative impact on your credit rating.

Since writing off a portion of your debt is really important, it’s a good idea to do business with a debt settlement professional who can negotiate on your behalf, instead of doing it yourself (even if Debt settlement option is still valid). The debt settlement company you choose will analyze your situation and should try to provide you with the best solution for your credit rating. This offer should be enough to satisfy your creditors, while leaving you in a financial ease.

If you have or have had difficulty making payments to pay off your debts, you are surely aware of the negative impact on your finances or balance of debts of late fees and charges. Debt settlement will not erase your late payment history in your credit report, but you will not have to pay for other late payments on your original debt.

Have an overview

A debt settlement will lower your credit rating. This is probably the worst drawback and you will have to choose if it is worth it. However, your credit rating and you will greatly benefit from this action at the end of the line.

1 Your debt / income ratio will go down, which is great for your credit rating.

2 You will stop adding late payments to your payment history on your credit report and by doing so, help your credit rating.

3 The faster you pay your debts, the sooner you can rebuild your credit rating and you will soon be able to take advantage of other financial products, such as loans with lower interest rates.

You need to see debt settlement as a long-term solution that will help you get rid of your debts now, but will also help you move towards a better financial future.

Ask for help and at work

The only way to really know if debt settlement is right for you is to meet a professional and discuss with him your financial situation as well as the options available to you. Take a look at our online applications today or contact one of our specialists.

Disability insurance: how useful is it? What does it protect?

Disability insurance – why is it so useful?

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A topic that no one likes to deal with and yet it can strike anyone: What happens if you can no longer work due to an accident or illness and subsequently lose a regular income? Who will pay for all living expenses? Financial support from the state is usually rather low, on average only about 700 euros per month *. Sound insurance cover is therefore essential to compensate for loss of income in the event of occupational disability.

What happens in case of occupational disability (BU)?

Possible reasons for an occupational disability can be:

  • Diseases of the cardiovascular system
  • Diseases of the musculoskeletal system
  • Mental illness
  • cancers
  • accidents

Being unfit for work means that you can no longer practice the profession you have learned because of one of these illnesses, an accident or a disability. At the same time, however, this means that you have the opportunity to pursue a different occupation every day for up to six hours.

Under these circumstances, you receive from the state a BU pension, also known as earning capacity reduction pension. Prerequisite: You have paid at least 36 months contributions to the statutory pension insurance in the last five years. For all those who were born after 2 January 1961, the following provisions apply in the event of total loss of earning capacity:

  • You receive about 30 percent of the last gross salary if you can work for a maximum of 3 hours a day.
  • About 15 percent of the last gross salary is paid to you if you work three to six hours a day.
  • If you can work more than six hours despite illness, you will not receive any government support.
  • You will receive the disability pension until your retirement. From then on you will receive monthly payments from the statutory pension insurance.

The figures make it clear that the financial support options provided by the state are small. A resulting supply gap is not enough. If you want to continue your life then the usual standard, a BU insurance can be useful.

What does occupational disability insurance cover?

Find out about the BU insurance / g-stockstudio / Shutterstock

If you take out a private insurance, you will receive a so-called monthly disability pension in addition to the disability pension. With such you can protect yourself against the income loss:

  • You also have the option of receiving the benefits if you could work in another job by the hour.
  • However, it is important that the contract does not contain an abstract reference. This would mean that the insurer can point out that you will not receive any monthly payments as long as you can work by the hour. It is therefore essential to agree to waive this clause.
  • The insurer pays regardless of the cause of the disability.

Important: In order to prove the occupational disability, you must submit various documents to the insurance:

  • Description of professional activity
  • medical reports

What do you need to know about taking out occupational disability insurance?

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  • If you take out the BU insurance at a young age, it makes sense for two reasons: The health check is easier to pass because you as a young person usually do not have any serious pre-existing conditions. The contributions are smaller.
  • Choose the amount of the contribution depending on which financial security you want in case of emergency. Experts recommend hedge 80 percent of the current net income.
  • Opt for a contract with momentum. This means: the contributions paid increase annually. This takes account of the fact of inflation.
  • Always answer insurer health questions truthfully. This has the following background: If it comes to a benefit case, this checks your information. If it turns out that the insured have made incorrect information, the insurance company can refuse to pay out.
  • Check if your policy is only valid in Europe or worldwide and ask what the situation is like if you are moving to another country or work abroad.
  • Pay attention to the circumstances under which the insurance cover does not apply. This can be, for example, if you become disabled due to a self-inflicted accident or belong to a specific professional group.
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