The pressure created by unpaid bills can be hugely debilitating, so a time comes when final action is needed. In many cases, that means filing for bankruptcy, but a more pro-active method of paying off existing debts is to agree a debt settlement with your creditors.
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It is an option that is growing in popularity, with none of the negative consequences that bankruptcy brings. It is a good idea to approach the National Foundation for Credit Counseling for advice on what options are out there, and they are extremely helpful when helping choose a trustworthy debt settlement company.
There are issues to examine, of course, not least the proper fees that companies should charge and how to tell which companies are bad news. The important thing from your point of view is clearing existing debts and easing the burden.
Understanding How It Works
As with all financial matters, it is important to understand what the advantages of debt settlement is and how the settlement companies operate. The key to it all is that the size of the overall debt to be paid is lowered by as much as possible. This saves money, while also relieving the debtor of the burden of debt.
As far as settlement is concerned, there can be a considerable amount of negotiation involved to agree a final settlement sum – and often with a number of separate parties. For example, credit card companies may seek one agreement, while a loan company may seek another. However, all of them will look to secure a settlement as close to 100% as they can.
It can become extremely complex, which is why a debt settlement company is the best choice. Their expertise, and knowledge of the law, means they should be able to get the best deal possible. Finding the right one and clearing existing debts with the biggest savings possible is the aim, but trust is important too.
Preparing The Way
When applying for a regular loan, financial advisors will tell applicants to prepare the way for their application, which basically means setting out to secure the best terms possible. When it comes to debt settlement, it is also important to prepare the way, to ensure the best outcome possible.
Any debt settlement company will provide some advice to their clients in advance of making any settlement move. Planning can be as long as 6 months, mainly because a trend needs to be established. Debtors should refrain from paying any debts for that period, before the company is seen to step in to begin negotiations.
However, to get the best terms on the settlement, it is important to act quickly. Once your creditor sends your account to a collection agency, there can be some difficulty in getting around a table. These agencies pressure debtors towards clearing existing debts in full immediately.
Alternative Options To Consider
There are other options that can be examined before selecting debt settlement as the way out of financial troubles. For example, it is possible to opt for a debt management plan, or to file for bankruptcy. The right one is down to a number of issues, but it generally boils down to the impact on your credit record.
Even with the best debt settlement company on your side, when the deal is done and the debts are cleared, your credit record will note that the debts were not paid in full. This has an influence on your credit score. It is a similar situation with bankruptcy, though the fallout is much more severe.
However, with a management plan, the debts are paid in full. The plan involves taking control of your finances in an attempt to strictly manage debt repayment. In this way, clearing existing debts is achieved in 3 to 5 years. However, your credit scores is increased.