Debt Settlement: Everything You Need to Know in 2018 about Debt Settlements
Confused about debt settlement? Say no more, because here you will find all the answers you are looking for!
Let’s start with a clear and concise definition.
A Crystal-clear Definition:
It comes under different names – credit settlement, debt arbitration or debt negotiation – but it is the same thing in the end: negotiating with your creditors to reduce your debt in exchange for a single payment.
However, a settlement is only successful when the creditor agrees to forgive you a percentage of your total balances, so you will end up paying less than the original amount you owe.
They can reject it as well, and that’s why it is important work with a competent company.
Many persons confuse this process with debt consolidation; however, they are entirely different:
- Settlement is a series of negotiations
- Consolidation is the combination of all of your unsecured loans into one monthly bills. Usually, it is done by requesting a new loan to replace all of your existing debt.
Now that it is clear, it is time to move on with more specific questions, so you can learn all about it.
How Does It Work?
Usually, the process goes down like this:
- You cannot pay your debt obligations and settlement is the unique way to get out of the problem
- You negotiate your debt with creditors, ideally with a settlement company
- You convince them that you cannot pay the original amount, because it surpasses your current income sources
- You stop making payments for your debt
- You open a savings account and deposit a fixed monthly payment there
- Once the sum in your account reaches what’s necessary for a lump-sum offer, your settlement company will let you know it
- It will negotiate the rest with your creditor in order to accept your final offer.
That’s how it works in a nutshell. Of course, it is harder than you can imagine, because negotiating is what will determine your luck in the end.
Is It Really Worth It? Why Do People Go For It? Is It Good?
Like everything else in life, it has its pros and cons.
People go for it because, unlike consolidation where you need to request a new loan with the hope of reducing their interest rate.
Does It Work for All Types of Debt?
It is mostly used for unsecured debt, like credit cards. However, secured loans (home mortgages for instance) are a different story, and the same goes for federal student loans, because it is much easier for the creditor to foreclose a house or repossess a car than negotiating the debt.
Will a Credit Settlement Affect My Credit Score?
There are some credit counseling companies who claim that it won’t affect your credit score, but the truth is another, because this will get reported and your score will be affected by it.
However, it all depends on how you negotiate the settlement, and that’s why it is imperative to work with an excellent company that will assist you from beginning to end.
Is Debt Negotiation Better than Bankruptcy?
Yes, it is.
Even though it will affect your credit score, it won’t follow you for the rest of your life like bankruptcy.
On the other hand, debt settlement will only stay in your report for 7 years and none will ask you if you ever did it in the past, something that does not happen with bankruptcy, because several banks and financial institutions will ask if you have done it in the past.
If you think bankruptcy is your unique option, then think again.
Contact us and we will get you in touch with the best debt negotiation professionals in Fort Worth to get you out of this trouble.
What Are The Risks?
There are certain risks, but most of the time, they only happen when you manage the process without professional assistance.
For instance, the immediate risk is that creditors might refuse your settlement offer. Furthermore, they can also use for you delinquent debt, which can be a real source of problems because you will face legal difficulties and get endless calls from debt collectors.
Again, here at Debt Removal Pros we will help you to minimize the risks to their smallest expression. Contact us and let’s solve your problem!
Can I Send a Debt Settlement Offer Letter On My Own? Is It a Good Idea?
Of course, you can, and there are even free templates online, but it is not a good idea.
First, you have no experience, and what many persons do out of desperation is to send the first offer. This is a fatal mistake, because you are giving debt collectors exactly what they want.
It is much better to get in contact with a competent company, so you can receive instructions on how to do this correctly.