Why Cancel Debt?

When debt is overwhelming, the logical next step is to seek some form of debt management. Debt cancellation is one method of reducing or eliminating what you owe. The reasons people cancel debt usually boil down to greater financial stability, although the circumstances of those who cancel debt vary greatly from case to case.

Discretionary Income

When a creditor or lender lets you cancel some or all of your debt, you no longer have to put as much of your income toward debt repayment. This often results in a budget that is much more manageable. With a manageable budget, you may be able to put money into savings or investments, planning ahead financially for the future. You also may have increased flexibility in your purchase choices.

Rebuilding of Credit

Debt cancellation does impact your credit score negatively. However, so does being consistently late on payments. When you cancel debt, you eliminate at least one source of additional fees that cause your credit rating to plummet. If you are consistent about paying your debts on time after cancellation, you actually may be able to raise your credit score over time. This of course depends on how many debts you cancel, because every cancellation appears on your credit history.

Relief from Collection Agencies

Often, when you have a delinquent account, credit card companies become quite aggressive in their attempts to get you to pay what you owe. This is true even for debts that have not yet gone to collections. Even when creditors and collection agencies comply with harassment regulations, many people quickly become overwhelmed by the sheer number and consistency of contact attempts. When you cancel your debt, these contacts stop.

Savings

When you cancel debt, you eliminate a principle balance that is connected to interest charges. With this principle gone, you don't have to pay the interest. Depending on the amount of debt you are canceling, this can translate to savings of hundreds or even thousands of dollars. The money you save will be available for other necessary items in your budget in the future.