Is debt settlement is a gimmick or really works?

These days debt settlement has become quite a common financial term and you might be hearing this quite often. For many people debt settlement is a strange thing since they never came across under this situation before. Over the last few years, the number of individuals and banks filing for the bankruptcy and insolvency has incredibly increased all over the world.

Over the last five years there were as many as 29 per cent of the debtors has filed for the debt settlement in the UK. Debt settlement is become a major financial tool for the banks who are facing huge amount of NPA's(Non-performing assets) and with the help of you this instrument they are able to bring down the deficit caused by the NPA's.

Is it a marketing propaganda to lure the debtors?

With the news of debt settlement spreading wide, many people starts calling debt settlement as a marketing gimmick and a financial propaganda to deceive the debtors. The story that support debt settlement as a marketing is gimmick start with the fact that bank from the very beginning are aware that at some point of the time a particular debtor should file for the debt settlement. Now debt settlement is never been a profitable situation for the bank because they have to lose a valuable amount of money.

What banks actually doto save their money despite of the debt settlement is that they recover the maximum interest from the debtor during the initial years of the loan repayment. Usually a debtor files for the debt settlement after successfully paying the loan for at least three years and during first three years of the loan repayment bank try to acquire maximum interest without leverage on the principal amount.

This is been done to ensure that if a debtor files for the debt settlement later, even in that situation bank should not suffer any major loos. The calculation that bank does and explain to the debtor is very complex and most of the debtors simply don’t understand this calculation therefore they never raises any concern regarding this to the bank and any other financial authority.

This is the entire story that many people usually knows about the debt settlement. May be in one or two cases this could be true, but the actual reality is far from what is been presented. The fact is that for 80 per cent of banks debt settlement is a loss situation however the velocity of the loss could be different from bank to bank. A debt settlement is always been a financial burden for a bank and it is important to know everything about the debt settlement before you are going for it.

This article is written by Christian Debt Services Team. Christian Debt Services can help you determine the best way to approach your debt situation and provide you the best debt management options possible.