Can you imagine how you would feel if you were completely out of debt? Would you wake up every morning feeling better about your life? Would you feel less stressed out? Would you feel as if a big boulder had been lifted off your back? Just think for a minute how you would feel if you were completely debt-free. Chances are that you would feel pretty darn good.
Eliminate debt problems through debt settlement
There are a number of ways to get rid of your debt problems. You could borrow money and pay off all of your debts. You could use the strategy called “snowballing” to pay them off. You could go to a consumer credit counseling agency for help. Or you could declare bankruptcy. However, there is a another way to get rid of debt problems that has become very popular over the past few years. It’s called debt settlement.
The basics of debt settlement
How debt settlement works is fairly simple. You offer a big, one-time payment on an existing balance. In return, you get forgiveness of the remaining amount of your debt. As an example of this suppose you owed $10,000 on a single credit card. You could approach the credit card issuer and offer a one-time payment of $4000. In return for this, the credit card provider would agree to forgive or erase the remaining $6000.
Why would a lender agree to this?
You might be wondering why a credit card company would agree to forgive a large portion of your balance. One of the important things to remember about credit card debt as well as medical bills and personal loans is that they are unsecured loans. This means that you were not required to provide any collateral that your lender could seize to help offset your unpaid balance. About all it can do is harass you for the money you owe. Another important fact about credit card companies is that once you are roughly six months behind in your payments, it will probably sell your debt to a debt collection agency where it will get just pennies on the dollar. This makes debt settlement a much more attractive option.
It is possible that you could do debt settlement yourself. The way you start the process is by calling the credit card company and requesting to speak to a person in its “settlements department.” If you are able to reach such a person, which may not be easy, you will need to explain how bad your situation is. You might say that you’ve put together a little bit of cash and would like to settle one of your accounts before you end up using the money someplace else. It’s more possible that you will get a competitive offer if that credit card company believes you have multiple accounts where you’re also pursuing debt settlement.
What to offer
A good rule of thumb is to begin by offering the credit card company a specific dollar amount which would be roughly 30% of your outstanding balance. The odds are that the customer service rep will counter your offer with a higher percentage or dollar amount. You will then have to counter the counter until you get the dollar amount or percentage down to what you had wanted.
Get it in writing
If you are able to finalize a settlement with your lender be sure to get everything in writing. If you are close to that magic six-month mark, the problem is that the credit card company could verbally agreed to your settlement but then just turn the remaining balance over to a collection agency. The written agreement you get should spell out the amount you will be required to pay and that the rest of your balance will be excused.
If you’d like more information about do-it-yourself debt settlement, watch this video.
The downsides of do-it-yourself debt settlement
Unfortunately, there are some downsides to do-it-yourself debt settlement. First, it means you will have to come up with a fairly substantial amount of cash all one time. This is because that’s what makes debt settlement attractive to lenders. And if you’re typical, you don’t have a large amount of cash just lying around in your bank account that you could use to settle your debts. Before you try to settle a debt, you need to stop and think where the funds will come from and whether or not you could better use that money somewhere else in your personal finances. Naturally, you also have to be a pretty good negotiator.
There are several advantages to using a debt settlement company rather than trying to do it yourself. First, this eliminates the need to have a large amount of cash available to settle your debts. Second, a debt settlement company such as National Debt Relief has debt counselors who are skilled negotiators and have excellent relationships with the credit card providers. They are almost always able to negotiate better settlements than you would he able to yourself. Third, when you choose to use a debt settlement company your debts will be consolidated. In other words, once all of your debts are settled, you will no longer be required to pay your creditors separately. Instead, you will send the debt settlement company a check a month until you complete your payment plan, which is usually two to four years. Plus, you won’t be required to pay the debt settlement company anything until it settles all of your debts and offers you a debt payment plan that you approve.
Watch out for scam artists
If you do choose to let a professional settle your debts, make sure you choose an honest and ethical company. There are definitely scam artists out there who will take your money and do nothing in return. One way to identify these scoundrels is if they require upfront fees or if they want you to sign up for a plan on your first phone call. Ethical debt settlement companies such as National Debt Relief require no upfront fees. And they will never try to “close you” on the first telephone call. Instead, the debt counselor you are assigned will go over your finances and provide free consultation – in terms of whether or not debt settlement would really help you. Legitimate debt settlement companies can also be known by their affiliations and online reviews. The best ones belong to the American Fair Credit Council and the US Chamber of Commerce and have been in business for a number of years.