Disadvantage of Repayment

Despite its numerous advantages, Repayment is accompanied by a fair share of disadvantages as well. Here’s a brief look into the disadvantages of repayment:

• A repayment plan debars a debtor from obtaining any further credit during the next five years. This is done with a view to limit the overall liabilities of an insolvent debtor under debt repayment or management plan.
• A debtor should have a reasonable income or full time employment so as to be able to pay regularly for the repayment plan. A debtor without any steady stream of income may have to face bankruptcy.
• Another disadvantage of Repayment plan is that a debtor can lose the protection from bankruptcy if he fails to abide by the terms and conditions of the same that includes missing out on any subsequent payments.
• In case the repayment plan fails and the debtor eventually falls into bankruptcy, the costs of the availed plan are added to the overall debt owed by the debtor. This adds to the already precarious situation of the debtor reeling under debts.
• Each repaying instalment is recorded in a public credit register and can significantly affect the credit rating of the debtor and any chances of borrowing any funds in the future.
• If a debtor has entered into a repayment plan and subsequently gets a sudden windfall like a win on a lottery, he is required by the law to pay back all the money initially owed to the creditors.

The right approach can negate all disadvantages of Repayment and can propel your finances upwards.