Accelerate settlement payments?

[airahcaz]

Does it ever make sense to accelerate settlement payments if one has no intention of utilizing credit?

Suppose a settlement agreement has been agreed whereby there are 12 payments of $500. Does it make sense to double up on payments or pay it in entirety if one can afford to do so in half the time?

[justbroke]

The real way to answer this question is to perform a financial review. How much in liquid assets does the person have on hand? How much in semi-liquid assets (401(k), stocks, etc) does one have? What the person's expenses and income are? Does the person have at least 6-months of expense saved for any emergencies? What's the stability of the person's job and income?

If you think of it purely from a financial standpoint... what's the cost of money? Example, if the settlement is $500 for 12 months with no interest and you could pay it off today ($6,000); isn't it better to put the money in an interest bearing account?

(Okay, the interest rates are terrible right now on 3-month and 6-month CDs, so this really isn't a lot of money we're talking about. It's just a fun exercise.)

[airahcaz]

The real way to answer this question is to perform a financial review. How much in liquid assets does the person have on hand? How much in semi-liquid assets (401(k), stocks, etc) does one have? What the person's expenses and income are? Does the person have at least 6-months of expense saved for any emergencies? What's the stability of the person's job and income?

If you think of it purely from a financial standpoint... what's the cost of money? Example, if the settlement is $500 for 12 months with no interest and you could pay it off today ($6,000); isn't it better to put the money in an interest bearing account?

(Okay, the interest rates are terrible right now on 3-month and 6-month CDs, so this really isn't a lot of money we're talking about. It's just a fun exercise.)

Let's assume this money is ready and available and not needed for emergencies. The question is more from a perception standpoint of the creditor - will they aggressively try to collect more based on the showing of accelerated payments? Wil a credit report show the quickness of settlement and be a red flag to other creditors to come collecting on other debts, or rather, a green flag in this case?

Or are there too many disadvantages and one should just stick to the agreed upon plan and timelines?

[justbroke]

I would answer "no" to the first two. You are never going to be on the good side of the creditor or collection agency. If you have a settlement, I hope that it was reviewed by an attorney and that the terms are crystal clear. For example, does the settlement mention that the debt won't be sold? Does it mention that the forgiven balance will be forgiven and a 1099-C issued? Too many questions.

I do not know what paying early does? Generally, if you're going to pay in a lump sum.... you pay less than what you would in an installment. So, this just doesn't make sense.

[shark66]

If I were ever to enter a settlement agreement (not bloody likely, but for the purposes of this conversation) I'd make them wait until the very last day on every payment scheduled...but that's me.

Good luck to us all.

[AngelinaCatHub]

If I were ever to enter a settlement agreement (not bloody likely, but for the purposes of this conversation) I'd make them wait until the very last day on every payment scheduled...but that's me.

Good luck to us all.

LOL, and I agree. 'Hub