Considering Debt Settlement? What You Should Know
Your credit card bills are stacking
up and for whatever reason you dont have the means
to pay the debt. You definitely have choices when
you are in this predicament. You can choose to do
nothing and hope for the best. Unfortunately, this
can cause you a bunch of headaches because creditors
will pursue you with unrelenting fervor. When the
creditor gives up, they will generally pass the account
over to a collection agency. Their pursuit is even
more relentless because in most cases they have purchased
your account. If you choose to do nothing, prepare
yourself for many sleepless nights. There are alternatives
that are less stressful and that can get you out of
debt.
A better alternative to doing nothing
about debt is one that benefits both you and your
creditors. Negotiating a debt settlement plan with
your creditors can help you dig yourself out of the
hole youre in. How a debt settlement works is simple.
You inform the creditor that you want to pay the debt,
telling them exactly how much you can afford. The
creditor accepts or rejects your payment plans and
you begin making payment. If you have debt of more
than $5, 000 you may think it would take years to
pay off the debt. Actually, the amount of your debt
probably includes late and over-the-limit fees, and
other charges. Creditors will often work with you
and may reduce or completely eliminate these charges.
This can significantly lower your balance. If your
account is associated with a high interest rate, it
is possible that the creditor may also lower this
amount for you.
You have choices when you consider a
debt settlement. There are companies in just about
every major city that offer debt settlement services.
These companies do all the legwork for you. You sit
back and save your money and when instructed to, begin
making payments towards your debt. While you are saving
your money the debt settlement company negotiates
the plans for you. Independent companies that perform
debt settlement services dont do so for their good
health. They will generally charge you an initiation
fee. Depending on the company, your monthly settlement
payment may include a fee as well. Be prepared to
do some research if you choose to work with one of
these companies. There have been reports of scams.
A more secure and less expensive method
for debt settlement is to go through a consumer credit
counseling agency. Of these, Consumer Credit Counseling
Service (CCCS) is the most well known. This is a non-profit
agency whose main focus is to help people get out
of debt. CCCS offers a Debt Management Program (DPM)
that works similar to a debt settlement. Depending
on the office in your area, you may or may not have
to pay a fee. If you do it is typically very insignificant.
An advantage of using CCCS is that they will help
educate you about financial matters.
An even cheaper way to initiate a debt
settlement is to contact your creditors yourself.
Many people are unaware that they can negotiate with
their creditors. You dont have to seek professional
assistance. There are a few ideas you want to keep
in mind if you decide to proceed on your own. Make
sure that the payment you agree to is what you can
actually afford. Once you and the creditor agree on
a debt settlement plan, it is a good idea to get the
terms in writing. Many creditors will generate a letter
detailing the agreement, but if they dont, simply
type of the terms and send it to them certified mail,
requesting their signature.
Sound good so far? Before you start
envisioning yourself debt free, its a good idea to
consider the pros and cons of debt settlement. On
the positive side, you dont have to worry about the
annoying calls from creditors. Since you agree to
a specific plan of action for your account they have
no reason to call you. Another good point for debt
settlement is that the terms are based on what you
are able to pay. You design a budget and determine
what you can afford. This also relieves some stress
since youre not stretching to pay your bills.
There are some disadvantages to debt
settlement. Although you establish a payment plan
with creditors, there is the possibility that they
will report your account as Not Paid As Agreed, which
is viewed as negative information on your credit report.
This information can remain on your credit report
as long as seven years. While you are making payments
in the plan you should not use your credit cards or
obtain additional credit. In addition, depending on
your debt you may be in the plan for up to two years.
James Duggan is an author,internet marketer
and membership consultant for Financial Freedom Society
Inc. http://www
.ffsi-rq.com For more information on debt consolidation,personal
finance,debt and credit card help visit: http://www
.fix-a-debt.com
