Credit Insurance – Why Borrowers Shouldn’t cancel Their Credit Insurance Plans
Debt cancellation or debt settlement is the voluntary or partial deletion of debt, owed by people, corporations, or governments. Debt cancellation, though, is different from debt settlement. The latter involves a third party intervening to help settle the debt for the indebted person or corporation. However, debt cancellation involves a third party doing nothing but monitoring and/or negotiating the debt owed. For a company, the reduction of debt is akin to getting a new loan.
When debt cancellation takes effect, it is equivalent to paying back the debt owed in full, minus interest and accrued fees. The process of debt cancellation involves the creditor sending written notice to the debtors listed on their accounts. The notice informs the debtors that they have sixty (60) days to bring their debts current, in full and in cash, or face the consequences of cancellation. The notice also states that they will be charged late payment charges, and that collection agencies may contact them and attempt to contact other debtors listed on their accounts. The notice does not specify the manner in which collection agencies will obtain contact information, such as through personal contacts or credit card verification.
In addition to this, the United Nations World Food Program and the United Nations Children’s Fund are both involved in the implementation of debt cancellation. According to the United States Government, the United Nations World Food Program disburses funds to developing countries in poor countries to help them provide food assistance. The program is administered by the United Nations Development Program (UNDP), a division of the United Nations Department of Economic and Social Affairs (USDED), and the Food and Drug Administration (FDA).
A nonrecourse debt cancellation involves a debt relief method in which debtors are not required to repay a part of their original debt. Nonrecourse debt cancellation occurs when the value of the money borrowed is greater than the value of the money returned. According to the FMV for this type of debt reduction, the debtor is required to repay only the principal, with interest. This condition is considered favourable for a number of reasons. Firstly, the principal amount realized will be less, thereby reducing the borrower’s burden and secondly, the repayment term will be much shorter compared to other methods of debt cancellation, hence resulting in considerably reduced expenditures.
On the other hand, in the case of credit unions, debt cancellation agreements may be made between borrowers and lenders. Under these agreements, the lender reduces the amount of interest and charges a fee for the cancellation of the debt. This method may work better for borrowers who own a substantial amount of money and for whom it would be difficult to find an alternative method of debt cancellation. Credit unions may also be more willing to provide favourable terms and conditions for debt cancellation, as they are members of large financial organizations, which may have greater influence over governmental policies.
Finally, there are debt cancellation agreements that can be executed directly by the consumer. Debt settlement or debt negotiation is one such method of debt cancellation agreements. In this case, a third party such as a professional debt negotiator enters into an agreement with the consumer. A debt settlement company can perform all the negotiations on behalf of the consumer, resulting in a significantly better financial protection.
Debt negotiation involves the borrowers and lending institutions agreeing on a revised repayment plan, reducing the principal amount payable. The reduction in principal amount ensures that the borrower is able to make the monthly payments on time. This method also requires borrowers to provide a significant down payment, which acts as security for the loan. Lending institutions are more willing to lend money to borrowers who have a significant down payment. This is because they are assured of receiving a significant interest rate for the loan and do not risk losing the entire amount of the loan if the borrower is unable to pay.
Debt cancellation agreements can be used effectively by both borrowers and lenders. This is because the creditors and borrowers do not need to go through the tedious formalities of going through credit insurance companies. Debt cancellation enables both parties to avoid the hassle of dealing with credit insurance companies and enjoy a smooth debt relief program.