Senior citizens are a very vulnerable class. Not only are they physically fragile. But even financially they are in a delicate place.
Introduction
Senior citizens are a very vulnerable class. Not only are they physically fragile. But even financially, they are in a delicate place. They have to deal with increasingly severe and unforeseen circumstances with a limited pool of money that cannot be replenished. They have a fixed amount of savings which they ration to meet expenses for the remainder of their lives. So any unexpected expense can cause a huge disruption in the balance of savings and expenses. This article highlights the significance of the senior citizens debt settlement facility in India in providing financial relief and security to senior citizens. Let’s delve into the details and explore how this facility empowers elderly individuals to achieve financial freedom.
Medical expenses are the biggest concern here. Medical expenses are their biggest concern because no matter how much one plans and prepares for retirement, illness can never be planned for. You never know what kind of ailment or affliction strikes and the kind of treatment you would have to seek for recovery. This may require the senior citizens towards a debt trap they may not know how to escape.
But in recent times, lending institutions have been relying more and more on the concept of ‘debt settlement.’ In certain situations, when the borrower’s financial condition is deteriorating by the day, the lenders take cognisance of such a situation. They prefer to take whatever they can before the borrower is in no position to pay anything. So the lender ‘settles’ the debt by taking a one-time discounted payment in settlement for the dues.
Banks mostly prefer to settle unsecured loans such as credit card loans. This is because there is no collateral for such loans. If it is a secured loan like a house loan or a vehicle loan, the bank can take possession of the asset and settle the loan. However, with unsecured loans, they have no option but to chase the borrower relentlessly or go for a settlement. So this may be a good option for senior citizens stuck in debt.
How Does Senior Citizens Debt Settlement Work?
Debt settlement, as discussed above, is when a lender allows the borrower to settle a loan at a one-time discounted payment. This helps the borrower become debt free, and the lender, in turn, receives some consideration for his loan, due to which he can close that loan account and lend the money received to someone else.
So why would a lender settle a debt for a lower cost if they have all the remedies of the law available on his side? The answer is simple. The time, effort and cost that go into recovery or even litigation would be far more than the cost of giving a discount and closing the loan. And the borrower’s credit with the credit rating agencies gets marked down, making it more difficult for them to acquire a loan in the future. The procedure to make a debt settlement is rather straightforward. Click here to learn about Debt Recovery.
- Take Stock of Your Financial Situation – Understand the valuation of your assets and their liquid values. Then estimate your costs along with a good amount of buffer for emergencies. This should give you a clear picture of how much you can spare. Now compare your debt to the lender and see how much you fall short.
- Get in Touch With Your Lender – If your lender has not already offered a debt settlement, you should approach your lender before the interest increases. Here you will have to explain your situation and the reason for your default. Rather than pleading with the lender for mercy and kindness, you must present your case to the lender so that they are convinced settlement is the best option for them.
- Negotiate the Settlement Amount – You can inform the lender about your exact financial position by showing them the crunched numbers. The numbers have to convince the lender that there is no other way. They may ask you to liquidate some assets to pay off their debt. So you will have to do your best to convince the lender that liquidating assets is not an option. You can do this by showing the lender that the shortfall between the due amount and the settlement is much less than the asset value.
- Pay the Settlement Amount – This is the final step where you make the payment of the agreed settlement amount. Ensure you receive an acknowledgement of receipt and an acknowledgement of settlement from the lender on making the payment, so you have it on record for yourself as well.
Facilities for Senior Citizens Debt Settlement
There are more than one ways to approach debt settlement. Let us take a look at these approaches.
- Approaching the Lender Directly – In this scenario, the borrower directly approaches the lender to settle the matter. This is advisable when the lender and the borrower have a personal relationship over and above the financial relationship. Otherwise, it is not advisable to speak to the lender directly without first consulting with an adviser, as it may worsen the situation.
- Approaching a Debt Settlement Agency – Many agencies specialise in acting as third-party negotiators with lenders. These are people with high credibility in debt structuring and finance and have financial and analytical tools at their disposal to arrive at the settlement amount in a highly scientific manner. So you can approach them with your financial numbers and ask them to negotiate the debt amount with the lender on your behalf in exchange for a commission, usually a percentage of the settlement amount.
- Approaching a Financial Adviser – A financial adviser can help you understand your actual financial position and help you understand how to manage your expenses so that some of that money can be salvaged as savings which can, in turn, make up for the debt settlement. A financial adviser will also be better positioned to negotiate with the bank on your behalf and explain your situation better in financial terms. Hence, the lender can assess the situation more objectively and more reassured manner given that a financial professional has assured this is the best possible scenario.
- Approaching a Credit Counsellor – Again, a credit counsellor is another kind of financial adviser. But he will strictly only analyse your debts and structure your debt so that the settlement amount is as close to the actual payable amount without adding any burden to the borrower. The counsellor will help you plan your expenses, help you invest your money somewhere, which can generate some disposable income and help you arrive at a discounted value for the debt with which you can approach the lender. You can also ask the credit counsellor to negotiate with the lender on your behalf because they might be able to speak in terms that the lender might better understand and get convinced.
Conclusion
The senior citizens debt settlement facility in India plays a pivotal role in assisting elderly individuals burdened by debt. Debt is a very serious matter and is even more relevant nowadays with increased living costs and a high unemployment rate. The consequences of non-payment of debt can be dire. So it can be very harrowing for senior citizens, especially because the effect of stress and anxiety is much direr on their health. If you need some advice regarding debt settlement or debt reconciliation, get in touch with Vakilsearch today, and we will connect you with our legal and financial advisors, who will assist you with your requirements.
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