Debt settlement is the act of negotiating your outstanding debt for less than what you actually owe. Often times, the settled settlement is actually paid to the lender in a single lump sum. However, this process can only happen if you are still delinquent on your original debt. For most people who have defaulted on their loans, lenders will rather negotiate a partial settlement since they will at least get some of what is due. Lenders also prefer to settle with someone who has the time and financial resources to continue to make the payments on their loan while they pay off their debt to the lender.
First, you must negotiate with your lender to see if there is any way to work out a debt settlement that is acceptable to both parties. Your lender may agree to remove certain fees that are irritating to you, such as finance charges and application fees. They may also remove the charge of interest that accrues over time.
There are two major pros and cons associated with debt settlement. First, this option allows you to pay off your outstanding bills quickly. This will help relieve the financial strain that may be causing you stress and worry. In addition, if you can make large lump sum payments, it will provide you with instant relief from both stress and worrying.
The second pro is that this option does not negatively impact your credit reports or your credit score. If you have fully paid off your original debts, this will have no impact on your credit scores or credit report. In addition, if you have paid off all but one-half of your outstanding balance, you will not have to pay back the remaining full amount owed. If this is the case, your accounts will still be listed on your credit reports. However, the accounts will not carry a negative balance.
Another pro that should be considered is the negotiation that occurs. With a debt settlement, you can rest assured that you are reaching a reasonable agreement with your creditor. You will not owe as much money as you owed previously and you will only owe the entire amount that was initially owed. This is typically a 30% discount on the originally owed debt.
If you have a lot of delinquent accounts, you may want to consider debt settlement as an option. Many creditors will settle for a lesser amount than they actually owe you. Your late fees and accrued interest may be eliminated or reduced significantly. If you have a lot of late fees, it can be a great benefit to you to settle with your creditors. Not only is your payment more affordable but your payment will no longer be reported to the credit bureaus.
Many people are unsure if debt settlement is right for them. After all, just because you end up settling your credit card debt does not mean that you can no longer use your credit cards. Your account can be opened again by simply spending money that you have received from a debt settlement. This is the biggest benefit to settling your debt, especially if you have a lot of debt that you cannot repay.
The process of debt settlement does not necessarily involve dealing with creditors. Some debt settlement companies will help you set up a trust account in which you can deposit money periodically. This is one of the benefits to dealing with a professional debt settlement company.
Once you are settled into a monthly payment, the debt settlement company will begin negotiating with your creditors. They will try to get your creditors to eliminate any late fees that you may have incurred as well as any over-limit charges. Some of the strategies they use may include getting the creditor to reduce the amount of interest that you pay, reduce the balance of your account, or even stop reporting the debt to the credit bureaus. All of these tactics can help you settle your debts and start anew.
Settling your accounts yourself is not advised. It can take time to successfully settle all of your debts, not to mention the risk of exposing yourself to identity theft. When you are working with a professional settlement firm, you will have access to specialists who have been through this process many times. They will know what strategies are most effective for you and how long the process will take.
In some cases, you may be able to settle for a lower settlement amount than you would if you filed for bankruptcy. You should make sure that you understand the bankruptcy process fully before you start the process. If you owe more than seven thousand five hundred dollars, you will probably have to file for bankruptcy. If you owe less than this, however, you may be able to use a debt settlement company or advisor without filing for bankruptcy. These companies are prohibited from using bankruptcy to collect unsecured debt, so it will be easier for you to repay the money you owe.