We all get into
financial situations that we can’t handle
from time to time. Sometimes the debt we
incur is more than we can cope with and we
need help. If this applies to you, then debt
settlement is one possible solution.
However, be aware of all that it entails in
order to make an informed decision about
whether it is right for your situation.
Debt settlement involves using a third
party to manage the debt situation. You may
have tried to talk to the creditors but to
no avail. Each month that the payment is
late, there is a fee. Once the fees push the
balance over the credit limit, there is
another fee. Things can get out of control
in an as little as a few months.
Debt settlement puts you in touch with an
agency that specializes in helping
individuals deal with serious debts. Debt
settlement agencies will review your
situation to see if you qualify. Debt
settlements are mainly done for unsecured
debt. This includes unsecured credit cards,
store charge cards, gas cards, and the like.
There is nothing backing the extension of
credit except your good name. Creditors have
taken a risk with you as to whether you can
repay any debt that you create.
Debt settlements can still affect your
credit in a negative way. Creditors may
report that you are entering into a debt
settlement plan and other notations that can
turn away future creditors. If you use a
third party debt settlement agency, make
sure that you understand this fact.
Once your case has been accepted, the debt
settlement agent will look at several
factors to determine a repayment plan for
the debt. The amount of the debt is
important. It needs to be beyond your
ability to repay without some intervention.
The debt settlement agent will look at the
interest rates being charged by the credit
card company. During a debt settlement, they
may be able to talk the creditor into
lowering the interest rate to a more
manageable one. The same goes for late fees.
If late fees are a problem, the creditor may
waive them in the interest of recouping some
of the debt owed to them.
Working with an agency, the monthly payments
agreed upon are made to the debt settlement
agency. From there, they forward the payment
to the appropriate creditors in accordance
with the terms of the debt settlement. Your
payments may include their fee for the
services rendered.
Working with a debt settlement agency can
keep the creditors off your back. Those
annoying phone calls will stop most of the
time once arrangements have been made for
creditors to get their money. A few may
still try to harass you, but the majority
will be glad they are getting something from
you.
Debt settlement agencies aren’t for
everyone. Try to work out a deal with the
credit card company before using a third
party to do it for you. Besides the fees
that may be charged to you, your credit
could take a hit in the process. Recommended Reading
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