Lump Sum Versus Payments – Which is Right For You?

When it comes to lump sum versus payments for debt settlements, most people don’t know which is right for them. Some people don’t think that the lump sum settlement is a good way to settle their debt because they think that if you receive less than you owe, you will still owe the same amount. There are many people who are unaware of the differences between the two methods.

The first difference between the two payment options is that with the first one, you receive the full amount you owed as a lump sum, whereas with the second one, you make monthly payments. However, lump sum settlement does have its advantages and disadvantages that you need to consider.

First of all, when you get a lump sum settlement, you do not have to pay anything until your debts are paid. Once you have paid off your debts, then you only need to pay the remaining balance. This means that you don’t have to bear any extra financial burden and it also gives you more time to plan for a debt consolidation loan or to save for other debt repayment. This is why more people prefer to take advantage of the lump sum settlement instead of going in for an installment plan.

However, when it comes to an installment plan, the monthly installments are paid in regular amounts that are directly proportional to the amount of money that you owe. Usually, the minimum monthly payment required for a lump sum settlement is around one-third the value of the total debt. On the other hand, if you go in for a plan that involves monthly payments, you need to pay one-fourth of the total debt every month before the due date.

The other reason why people choose this payment method is that if you have multiple debts, then you need to make payment to the bank to have it consolidated and reduce the interest rates that you have to pay. Even if you only have one loan, you have to pay it off and pay installments. With an installment program, you need to pay several loans as well and this may lead you to spending money unnecessarily.

Another thing that people consider when choosing a payment method is that it is easier to manage multiple loans. In an installment program, you need to pay each individual loan and you also have to make payments for the loan and interest rate of the consolidation loan.