Many of us fail to acknowledge the potential of debt settlement to completely resolve our credit problems. This is mainly because we hear and see very few advertisements about this credit-busting option.
A lot of us are more familiar with conventional methods of settling our financial obligations such as debt consolidation loans as well as definite debt management plans. And because of this, we rarely employ debt settlement programs to immediately pay off our existing debts.
But, if you would like to know more about debt settlement and what this option can do for you, then we encourage you to read the rest of the article. It is because this article will not only discuss a brief overview of how debt settlement works. We will also tackle tips on how you can take an excellent debt settlement program.
What is Debt Settlement All About?
Debt settlement, otherwise known as debt negotiation is a credit-busting method where a borrower tries to negotiate with his creditors to reduce his existing debts. He can do this on his own or he can employ the services of a professional negotiator.
What actually happens in a debt settlement is that a debtor or his chosen negotiator will try to persuade creditors to accept an upfront settlement fund, which ranges from 25% to 50% of the total money owed, to retire his or the clients existing credit accounts. The negotiating party will attempt to convince lenders that in accepting the settlement fund, they can immediately recover a big percentage of the money they have loaned to the borrower. And should creditors find the settlement offer hard to resist, they would be willing to sign an agreement that terminates the financial obligation of the borrower to their lending organizations.
Disadvantages of Debt Settlement
Still, it is worth mentioning that there are risks associated with a debt settlement program. Should a consumer decide to take this option, he can expect his credit rating to slide down, as debt negotiation activities have a negative impact on a consumer’s credit records. And this can surely affect the individual’s chance of getting approved for new credit accounts .
You also need to come up with sufficient funds not only for the upfront payment offer you will be presenting to your lenders. But you also need ample sums of cash to pay for the services of a professional debt negotiator, should you decide to hire one. Not only that. Debt settlement can also increase the income tax that you have to pay the federal or state government.
Now what if you have already taken a debt settlement program? Would it still be possible for you to attain thorough bad credit repair after employing this credit-busting option? The answer for this is a resounding yes. But how can you do so? Well, by using the tips that we have enumerated below.
Tips on Taking a Debt Settlement Program
1. Check out the track record of a debt settlement firm before employing its services. Before you sign up for a debt settlement program, make sure that you investigate first the track record of the organization you plan to deal with. Ask for its license or accreditation with the federal or state government. And search for reviews and testimonials from satisfied clients. This way you can have the assurance of employing only the services of reputable and legitimate debt settlement firms which will help you resolve your credit problems.
2. Shop for the most affordable debt negotiation services. You need to take your time in shopping for organizations that can provide excellent debt negotiation services for very competitive prices. This way, you can succeed in convincing your lenders to reduce your outstanding credit balances without shelling out huge sums of money.
3. File all the debt-settlement related records. You also need to properly file all the documents, receipts and records of your debt settlement agreement. This way, you can have sufficient evidence to present should your creditor decide to sue you for not paying your credit accounts in full.
4. After closing up some of your debts, start rebuilding your credit reputation. After your debts have been closed, the next step that you should do is to work on attaining bad credit repair. You can only do this by opening a new bad credit-credit card account or by taking personal loans. Use your bad credit-credit card or credit account discretely. And make sure that you pay off all your monthly credit charges on time. In so doing you can gradually cause your credit score to go up until such time that you are able to fully regain your credit worthiness.