Debt cancellation is a service offered by banks and lenders to consumers that is designed to protect them from high-interest credit card bills and loan payments in the event of death, financial hardship or job loss. This is an added, additional and optional coverage that a consumer pays a premium for each month as part of her credit card bill.
No Negative Impact on Credit
When a consumer files under the debt cancellation clause of her premium and pays the fee to cancel the debt, the creditor can't report the debt as unpaid or even as a "settled" debt. The marking of the debt as "paid" won't cause any harm or injury to a consumer's credit score or impact them negatively down the line.
No Creditor Harassment
Unpaid bills result in calls and letters from bill collectors. Once a debt cancellation claim is filed and fees paid, the creditor agrees to cease any and all collection activities.
In cases where a hardship is temporary, the creditor will step in and make monthly payments on behalf of the consumer until the consumer's circumstances improve and she can resume payments.
Financial Stability
If a debt cancellation request is filed due to job loss or death in the family, the cancellation of the debt can give consumers peace of mind as they settle their affairs. Budgeting after a tragic or financially hard-hitting event can be very daunting to many families. The debt cancellation can assist them in getting back to a more financially stable situation.
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