A debt agreement can be a useful legal instrument that offers relief when you’re having difficulties with unmanageable debt. Many people tend to have a negative view of these agreements. Let’s take a look at a couple of myths.
- The Agreement Destroys Credit Ratings Forever
Information that is recorded on your credit file can only be saved for five years. So if you sign a credit agreement, it will typically vanish from your file after five years. During this time, most people will repay the agreement and land up debt free at the end of the agreement. Some people even get to start saving their funds again.
- Only Fools Enter Such Agreements
People who enter debt agreements are actually smart. There is a myriad of reasons as to why people get into debt, including pregnancy, unexpected health concerns, job loss and more. These things can happen to anyone. It takes a wise person to realize that they are in over their heads and to seek out a sensible solution such as a debt agreement, instead of allowing things to spiral even further out of control.
- People Who Enter These Agreements Are Cheats
This is a misconception. People who enter such agreements are not greedy. Things aren’t always so cut and dry. In fact, most people who come into debt have been affected by things outside of their control.
- A Debt Agreement is the Same as Bankruptcy
There are actually a few particularly important variances that make debt agreements a greater option for many people. Unlike bankruptcy, a debt agreement only includes unsecured debts. So, if you have a mortgage, for instance, it won’t be included in the agreement, provided you continue to repay the secured loan repayments so your assets are not at risk. With a debt agreement, your assets will not be sold to pay unsecured creditors, the way it would be done with personal loans and credit cards.
- It’s Just an Expensive Scam
A debt agreement is far from a scam. In fact, these agreements are legitimate structures. While they may indeed cost money to implement, it is certainly money well spent when they help you to eliminate expensive debts. Some of the fees involved with the agreement are based on the amount of debt and your capacity to repay it. It won’t usually be a fixed charge, but it all depends on your personal circumstances. The fees are typically incorporated into a budget and included in the overall payment arranged under your debt agreement.
The reality is that a debt agreement is actually a legal structure and not a scam. They are inexpensive agreements when you compare them to the cost of your remaining debt.
These agreements should not be ridiculed or even feared. They are completely smart, sensible and safe solutions to your unmanageable debt. There are people who are passionate about helping out clients gain control over their debt and finances. If you are ever faced with financial hardship, take positive action to alleviate your debt by entering a debt agreement.