Debt Settlement

Debt Resources

Understanding Debt Settlement

If you are drowning in debt, you might be considering debt settlement. Debt settlement is the process of settling the debt for less than what you owe. Once you pay the settlement amount, the creditor cannot proceed with collection efforts. That means you can finally put the debt behind you and move on with your life.

Many consumers benefit from debt settlement. Before you dive in, though, learn more about the process, as well as the pros and cons. 

The Debt
Settlement

Process

Negotiation is the main component of the debt settlement process. If the negotiation is successful, the creditor will agree to settle the debt for less than what you owe. While it might sound impossible to get a creditor to agree to a settlement, this is very standard in the debt collection industry.

You have the option to negotiate the debt yourself or to hire a company like Debt Defenders to negotiate on your behalf. If you choose to handle it yourself, you’ll need to contact the creditors, ask the creditors to agree to accept a lower amount and then get it in writing. Then, you will need to pay the debt based on the agreement. Failure to do so will void the settlement offer.

Handling this yourself can be time-consuming and overwhelming. If you want to go the easier route, you can have a debt settlement company work for you. Debt settlement companies have the experience and volume necessary to negotiate with creditors for substantially lower rates, so you can pay much less than what you owe.

Working with a Debt Settlement Company — What You Need to Know

If you choose to work with a debt settlement company, the process is quite simple. First, you will talk to a debt settlement expert. During the conversation, you will go over the amount you owe and your budget. You will also discuss your goals related to your debt and disposable income.

Then, the certified debt consultant will determine how much you need to set aside each month to reach your goals and wipe out your debt. That amount will quickly add up to enough to settle your debt.

While you grow the account, the debt settlement specialist will work on your negotiation strategy. This strategy will be used to maximize the money you have in savings. The goal is to settle the debt as quickly as possible for as little as possible.

Finally, it will be time to negotiate on your behalf. You will pay a negotiation fee based on the debt that you have. While some companies charge you during other parts of the process, legitimate settlement companies only charge for negotiation services after each debt is settled. At Debt Defenders, we guarantee that fees will only be taken upon successful settlements.

Your debt settlement specialist will work quickly to get a settlement. When the offer is complete, the specialist will show you the settlement. If you agree with the settlement, the debt specialist will process the payment.

What Kind of Debt Is Eligible for Settlement?

You can seek a settlement for unsecured debt. That refers to debt that isn’t secured by an asset. Unsecured debt includes credit cards, personal loans, medical debt, and some private student loans.

You cannot reach a settlement for secured debt, such as vehicle loans, mortgage loans, or federal student loans. Also, you cannot settle tax debt, utility bills, or debt from lawsuits.

Benefits of Debt Settlement

There are numerous benefits that come with settling debts. Let’s go over some of the main reasons people choose this option.

Resolves Debt Faster
Debt settlement lowers the balance you owe. When you owe less money, you can pay it off faster. If you want to get out of debt quickly, debt settlement is a wise choice.

Make One Monthly Payment
You can combine all your debt together and make one low monthly payment. Normally, you will pay less than you would if you went through debt consolidation or a debt management plan. Your debt consultant will work with you, so you only pay what you can afford and nothing more.

Better Than Bankruptcy
You might consider bankruptcy if you’re in debt. However, bankruptcy often has unfavorable payment terms, and it leaves a blemish on your credit report. You can avoid both problems by choosing debt settlement instead.

No Conflict of Interest
If you choose credit counseling, the counselors might have a conflict of interest. They often work on behalf of creditors instead of you. You don’t have to worry about that when you choose debt settlement.

Learn Budgeting
Debt settlement can help you build good money habits that will help you in the future. You will create a budget to use to pay your debts, and you need to stick to that budget to put the debts behind you. These new habits can carry over and help you make sound financial decisions in the future.

 

Drawbacks of Debt Settlement

While debt settlement has lots of benefits, there are some drawbacks to consider, as well. Consider these drawbacks before you enter a settlement agreement.

Impacts Your Credit Score
Your accounts will go past due during the debt settlement process. Otherwise, your creditors won’t negotiate and lower the amount you owe. When your accounts go past due, your accounts are impacted.

Creditor Calls
When you fall past due on your accounts, creditors will call to try to collect the money you owe. Debt Defenders can help you with this by providing you with information you can use when you answer the phone.

Possible Legal Action
When you fall behind on your debt, creditors can threaten to take legal action. This can be quite frightening. Debt Defenders can connect you with legal resources if the need arises.

Is Debt Settlement the Right Choice?

Debt settlement is a big decision, so you only want to choose it if it’s the right choice. Debt Defenders does not recommend debt settlement for people who have less than $7,500 in unsecured debt. Instead, people should consider debt consolidation.

Also, if you are worried about your credit score, you might want to choose a debt consolidation loan instead of a settlement. You can pay off your debt without getting behind on payments.

However, there are many circumstances when debt settlement is the right choice. You should consider it if you:

  • Have $7,500 or more in high-interest unsecured debt that you’re struggling to pay.
  • Are falling behind in payments.
  • Don’t have extra income to put toward debt.
  • Need an affordable solution that allows you to move past your debt.

 

Choosing a Debt Settlement Company

If you decide to move forward with debt settlement, you need to choose a settlement company that is right for you. Ask some questions so you will know if the company is a good fit.

First, ask how much the program will cost. Remember, you should only pay for the negotiation service.

Listen to the answers and then trust your gut. If the company seems like a good fit, you can move forward with debt settlement.

Starting The Debt Settlement Process

Are you ready to get out from under your debt? Debt Defenders is here to help. Call us today at (888) 333-3851 for a free consultation with our expert team of debt consultants or fill out the form below to be called by our debt consultants.

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