Although many debtors are reluctant to trust debt settlement services, they are a legitimate way to help resolve mounting debt without filing for bankruptcy. The truth is most creditors would rather you seek the help of debt settlement companies and settle your debts for a fraction of what is owed than to file for bankruptcy and not be obligated to pay anything at all on the debt. Of course, the ideal solution would be for you to pay everything off in full, but when that is not possible, it is always best for the creditor to work with you to pay something.
There are some basic things you should know about debt settlement programs before you turn over your credit negotiations to them. First, they are filled with risks, and sometimes the fees you must pay to pull out of debt with your creditors land you in more debt with the negotiators. Most companies who settle debts for consumers do not offer free services. The fees are not standardized across the industry. Many charge a percentage (15 to 18 percent) of your total debt in order to perform the service for you. Others charge a percentage of what you agreed to pay as a settlement (around 25 percent). Still others, charge a flat monthly rate until you have paid off the settlement. Paying a monthly rate is still another debt.
Usually, the programs negotiate for you to pay 20 to 75 percent of what you actually owe. You then are responsible for paying a one-time lump sum by a mutually agreed upon date in order to pay off the debt. You no longer have to give a monthly payment to the creditor, and the creditor reports the debt to the credit bureaus as “settled.” Any outstanding delinquent payments or negative credit history on your credit report prior to this negotiation, however, remains.
Often the fees you pay to a debt settlement service to settle your debts are placed in an escrow account. The debt negotiators have access to this account and commonly take their fees out of this account before your savings to pay off your debt can accumulate there. Therefore, if you are putting money in an account believing that you have a certain amount in order to pay the amount you settled the debt for, you should probably recalculate the amount you have actually saved. If you have credit card debt, for example, as a low-end estimate of about $20,000, a 15 percent fee would place your debt to credit card debt settlement services at about $3,000. Only then, can you start saving the $20,000 to pay off the original debt.
As with anything that helps you clean up your financial future, debt negotiation services have both pros and cons. While they do push you to proactively solve your debt problem, they can be quite costly and time consuming. Every individual debt problem has its own unique solution, so you have to be careful that the solution you choose is the right one for you. If the right thing for you is debt settlement services, make the commitment and buckle up for the long ride.
Although many debtors are reluctant to trust debt settlement services, they are a legitimate way to help resolve mounting debt without filing for bankruptcy. The truth is most creditors would rather you seek the help of debt settlement companies and settle your debts for a fraction of what is owed than to file for bankruptcy and not be obligated to pay anything at all on the debt. Of course, the ideal solution would be for you to pay everything off in full, but when that is not possible, it is always best for the creditor to work with you to pay something.
There are some basic things you should know about debt settlement programs before you turn over your credit negotiations to them. First, they are filled with risks, and sometimes the fees you must pay to pull out of debt with your creditors land you in more debt with the negotiators. Most companies who settle debts for consumers do not offer free services. The fees are not standardized across the industry. Many charge a percentage (15 to 18 percent) of your total debt in order to perform the service for you. Others charge a percentage of what you agreed to pay as a settlement (around 25 percent). Still others, charge a flat monthly rate until you have paid off the settlement. Paying a monthly rate is still another debt.
Usually, the programs negotiate for you to pay 20 to 75 percent of what you actually owe. You then are responsible for paying a one-time lump sum by a mutually agreed upon date in order to pay off the debt. You no longer have to give a monthly payment to the creditor, and the creditor reports the debt to the credit bureaus as “settled.” Any outstanding delinquent payments or negative credit history on your credit report prior to this negotiation, however, remains.
Often the fees you pay to a debt settlement service to settle your debts are placed in an escrow account. The debt negotiators have access to this account and commonly take their fees out of this account before your savings to pay off your debt can accumulate there. Therefore, if you are putting money in an account believing that you have a certain amount in order to pay the amount you settled the debt for, you should probably recalculate the amount you have actually saved. If you have credit card debt, for example, as a low-end estimate of about $20,000, a 15 percent fee would place your debt to credit card debt settlement services at about $3,000. Only then, can you start saving the $20,000 to pay off the original debt.
As with anything that helps you clean up your financial future, debt negotiation services have both pros and cons. While they do push you to proactively solve your debt problem, they can be quite costly and time consuming. Every individual debt problem has its own unique solution, so you have to be careful that the solution you choose is the right one for you. If the right thing for you is debt settlement services, make the commitment and buckle up for the long ride.
Tagged as:
debt settlement service,
debt settlement services
Comments on this entry are closed.