The most common mistake people make is to avoid talking with their creditors. If your in no position to continue with your payments, then you might as well consider to go for a debt settlement. All you have to do is to talk with your creditor for a negotiation and if possible they might even forgive your remaining debts and reduce outstanding ones by 40 – 60%. This though is best done through a professional settlement company.
5 Benefits of Debt Settlement:
For any kind of debts or loans that you owe, following the debt settlement plans will provide you with the following basic benefits:
1). Bankruptcy avoided: When you can easily settle off your debts with negotiations and talks, then why should the route of bankruptcy be taken. It may also prove to be hard to talk with your creditors, but they are always organizations or legal help for you. This route must be tried in all possible ways first, before you opt out for bankruptcy,which might make you loose your assets to pay off the debts.
2). Single Payment: Debt settlement plans help you to pay single bills at a time, rather than doing multi payments in a month. The monthly payments are reserved in the trust account to be paid after negotiations with the creditors.
3). No more unfair collection practices: Once you negotiate well with the creditors, you will not have to face any unfair collection practices, neither face any harassment.
4). Extra Charges Removed: The benefit of a settlement, is that you do not need to pay off any extra charges, such as late fees etc.
5). No need for legal movements: Through a well organized settlement, there is no need for any legal actions,from your creditors, who may even consume your property legally, if debts not paid.
How Settlement Works:
Settlement means, to talk, to negotiate with your creditors, to settle the debt for lower than what you actually owe them. And this though is not done by you alone, its done through a company that charges a fee for their services. To further understand this scheme, lets see to an example below.
An example:
John has 5 credit cards and he owes $100,000 debt on total. John visits a few counseling agency, but the monthly payments they negotiated for, were too high for him to pay. John avoids declaring bankruptcy and prefers to seek help from a debt settlement company ABC. Now, here are the procedural steps that John goes through.
1). Stop payment to creditors: The settlement company, advises John to stop his payments to credit and rather deposit his money monthly in a savings account that is created for him by the company.
2). Collection calls finishes: Now that John has joined the settlement company, he no longer handles collection calls from creditors, rather, they are handled by his representative.
3). Negotiation starts: Once he has a sufficient amount in his account, John’s representative starts negotiating with his creditors.
4). Debt reduces by 40 to 60% : Creditors now know of John’s critical financial situation and agree on cutting off 40 to 60% of his outstanding bills and accept a reduced amount.
In the same manner, John’s other credit debts are handled one by one, and gradually after a period of two years and continuous struggles and savings, John is finally able to pay off all his debts efficiently, which could not have happened, if he did not opt for settlement procedures.
Kinds of debts that can be settled:
The settlement plan works not only for credit card debts, but for many other like medical bills, personal loans and gas/store cards. However, taxes, federal student loans, mortgages, child support and car loans are exempted from settlement plans.
Settlement Fee:
Companies that offer debt settlement often charge their clients around 25-35% of the debt balance. The fee are charged based on the the total amount of debt, total debt accounts and total amount that will be saved by settlement.
Depending upon the total debt amount, it may take you 2 – 4 years to settle all your due debts.
Choosing the best settlement company
To be able to reach out to the best settlement company, here are a few guide lines that you can follow.
- Company profile: Check out the profile, which you think suits most with your situation and the services that they offer.
- Company accreditation: This is mainly the proof or certifications that the company has obtained, whilst settling debts. See their membership and the reports based on them.
- Program fee : This is critical for you to analyze as you need to understand the fee amount that is charged by the different companies.
- Client testimonials: This is a helpful venture, as it helps you to know the satisfaction level of the company’s clients. Also ask for feedback from different people.
Debt settlement programs are an efficient way to repay your debts provided, you follow the specific guidelines and keep a positive attitude to the problems.
