Missing payment dates is never a good thing. The day after you fail to pay your monthly dues for a loan or a credit card, collection agents will be on the phone in hot pursuit to get you to pay immediately. Next thing to happen is your debt increasing because you will get penalized for payment delays. Quickly you realize that your already tight budget is about to get stretched thinner from the mounting debt.
Fortunately, we live in times where we now have options to address our unpaid debt. Better yet we do not have to bear this kind of burden alone. With some discipline, lifestyle adjustments and professional assistance, dealing with debt can be made simpler.
One very valid option is debt settlement. This solution is designed for people who struggle with meeting the minimum payment or are thinking of filing for bankruptcy. With debt settlement, a debt relief company will negotiate on your behalf with the lender to settle your debt for less than the full amount that you owe. The idea is simple: by negotiating your debt settlement options, the creditor might agree to forgive a portion of your debt.
During such a process, you will make manageable monthly deposits into a special savings account, which will make up the predetermined lump sum to be paid to the lender. The goal is to offer your creditors a large, one-time payment, and use this as leverage to ask them to forego the remaining balance.
For example, if Rick owes $10,000 on a single credit card and is struggling with the payment, he may have the option of debt settlement. Through a debt relief company he could offer his creditor $4,000 as one-time payment. If the credit card company agrees to the settlement, he potentially saves $6,000 from his original debt.
The debt relief agency will then get, as payment for its services, an agreed upon percentage of Rick’s total savings or a portion of the amount of debt. For instance, let’s say 20% of the savings is what the debt settlement company will retain as payment, which is $800.
You may be thinking: is it possible that a creditor would agree to forgive a portion of my debts through settlement alone? That is a valid question, and one that deserves an honest answer. While not all creditors may agree to settle, a lender would still be on the lookout for the best possible scenario in order to protect its financial bottom line. If it determines that you cannot settle your debts and may be close to bankruptcy than the average consumer, then it may be willing to accept a fair amount over nothing at all. Debt relief companies have posted huge results settling debt for their clients
How else can a debt settlement company help you in managing your finances? Aside from getting you to pay a lower amount than what creditors require, opting for this program can give you the discipline needed to put away some money each month and use the lump sum to bargain with the lender. The debt relief company will also push to get a settlement, not only because it is beneficial to you, but also because, more often than not, the company only gets paid after a debt is settled.
While you can try and negotiate with lenders on your own, hiring an actual debt relief group makes more sense because they already have existing relationships with creditors with years of experience in handling debt settlements.
In doing business with a debt settlement company, you will have money put aside in a separate savings account, which may be administered by an independent third party. Although the money saved here is for the purpose of the one-time payment, any interest it accrues goes to you. The independent account administrator, though, may charge you a small fee for maintenance since it has the responsibility of transferring the funds once the desired amount is achieved.
Enrolling in a debt settlement program is one way you can weather out your financial crisis. If you get your way, you’ll cut your debt substantially. Whichever way you decide, the fact that you are reading about debt relief options and researching on them means you have taken the first step in getting yourself out of debt.
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Raj Kumar is a qualified business/finance writer expert in investment, debt, credit cards, Passive income, financial updates. He advises in his blog finance clap.