Understanding Debt Settlement
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Debt settlement programs are typically offered by a company negotiating with your creditors to allow you to pay a settlement to resolve your debt. The settlement is another word for a lump sum that’s less than the full amount you owe.
Normally, the debt settlement company will setup for you to pay a set amount on a monthly basis that is due until you have enough payment to pay off your creditor.
Reality of your Debt
As soon as you agree to a debt settlement program, many of the settlement firms will advise you to stop making the credit card payments monthly. Taking such a step will enable you to save money and focus solely on the lump sum payment agreed upon. This immediately lowers you overall bills by consolidation.
Once you have sufficient amount of money, the debt settlement firm on your behalf will negotiate with your credit card company. It will offer them a onetime large payment that will settle your debt.
The debt settlement companies will work to reassure you that the onetime payment is much less that the original payment that you owe. These companies even state that will ensure that you no longer get bothered through endless calls from the creditor or the collection agency.
The Truth about Credit Settlement
If you agree to the debt settlement plan with the Debt Settlement Company, you will have a plan mapped out for you. For instance, if you have 10,000 dollars in debt and that it takes three years for you to save enough to reach a settlement.
This usually amounts to about half of the amount you owe, but your total debt would have doubled with the balance including interest.
By the time you save half of you original debt, which is 5,000 dollars; the debt will become 20,000 dollars respectively. In this regard, to reach a settlement will mean that you should have half of the new amount which is 10,000 dollars.
Its really addition by subtraction. Get a Free Debt Relief Quote
Disadvantages of the Debt Settlement
- You need to be Cautious about Fees: Several of the debt settlement companies not only charge an upfront fee but a percentage of the total debt as well. Its important to understand the terms being presented before committing.
- Credit Score Affect: It happens that that credit score gets dropped because of partial or late payments. This occurs because you do not make payment for some time as part of your debt settlement. On the other side, the financial experts believe that settling of the debt for less against the full credit card payment also hurts the credit card score considerably.
- Check Reliability of your Debt Settlement Company: You need to remember that the industry is not solely run by the federal government. There are plenty of scams where the respective firms are able to collect money and never settle the debt payment at all.
- You are liable to pay taxes on the debt that you don’t have to pay: A point for you to remember is that the difference between what you pay and what you owe is considered as the income by the Internal Revenue Service. This means you need to pay the taxes that come under this amount.
The Best Debt Settlement Companies heading into 2017
National Debt Relief
National Debt Relief does a good job on telling you what you can expect from the beginning. The will cover kinds debt qualify, how much you need to enroll, the fee you can expect to pay (20%), and the average savings after fees (30%). The company works with a wider range of debt than most. National Debt Relief also has an A+ rating with the BBB, and is accredited with the AFCC and IAPDA. (You are out of luck in Connecticut, Georgia, Kansas, Maine, New Hampshire, South Carolina, Oregon, Vermont, and West Virginia.)
CuraDebt says it will work with as little as $5,000 in debt in certain circumstances, so if you have a smaller amount of debt, it might be worth a look. Incorporated in 2000, CuraDebt is also one of the more established debt-consolidation companies. (CuraDebt’s services are available in 37 states. You’re out of luck in Colorado, Connecticut, Georgia, Idaho, Illinois, Kansas, North Dakota, New Hampshire, South Carolina, Vermont, Washington, Wisconsin, and West Virginia.)
What to do if there is not Debt Settlement
When there is no debt settlement, it will be better if you take out only one loan and use it to pay back all of your remaining debts.
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