What is debt settlement and how does it work?
Debt settlement basically refers to the process wherein creditors accept a fraction of the total outstanding balance from the debtors. The settlement amount is usually reached after a lengthy and continuous negotiation process. Once the creditors receive the settlement amount, they mark the status of the accounts as "Paid as Agreed" or "Paid as Settled" on the credit report.
Debt settlement involves a lengthy negotiation process. The negotiation happens between the settlement companies and creditors after the debtors have saved a specific amount in the trust account managed by an independent party. The experienced negotiators contact creditors and request them to accept an amount which is only a small portion of the total outstanding debt. Once the creditors accept the proposal of the negotiators, a written agreement is finalized and signed by the concerned parties.
The only thing that the debtors have to do now is to pay the final amount to creditors and get debt free.
When should you approach settlement companies?
No one wants to approach a settlement company for repaying credit card debt, departmental store cards, personal loans, payday loans, etc. However, certain circumstances compel you to seek help from the debt settlement companies in USA which are given below::
- You have been lagging behind your payments for more than 90 days.
- You have lost all hope of repaying the loans on your own.
- You want to pay back your creditors.
- You want to prevent your accounts from being assigned to collection agencies.
- You're afraid that creditors may file lawsuit against you anytime.
Check out the 6 simple ways to select a the right company that can help you reduce outstanding balance.
Can you really save money through settlement programs?
Credit card debt settlement programs help you save money. These programs help to lower your principal balance. For instance: your total outstanding balance on a credit card is $45,000. The credit card settlement company negotiates with your creditors and lowers the outstanding balance to $25,000. This means you're actually saving $20,000.
The best part of settling credit cards is that you can save money within a short period of time. There are lots of other debt relief programs which may help you save money, but they often come with long repayment terms. You may have to make small monthly payments but eventually you'll pay more and save less.
Can you get settlement help online?
You can get settlement help from both the traditional and online companies. All you need to do is watch out for the reliable credit card settlement companies online. Browse through the websites of the online settlement companies and gather knowledge about the programs. Once you enroll into the program after completing the necessary formalities, the company will start negotiating with your creditors for reducing your outstandingbalance.
Make sure you check out the pros and cons and use the following tips before getting debt settlement online help.
Find out what the existing customers have to say about the company through the "Client Testimonials" section.
- Check out the accreditation of the company
- Find out if there's any valid contact number of the company
- Refuse to pay any upfront fees to the company
- Avoid working with a company based on verbal or impossible promises
If you don't want to negotiate and lower your payoff amount, then you can try out other options. For instance: you can talk with your creditor and try for a hardship plan. Otherwise, you can enroll into a consolidation program or a debt management plan to pay back your creditors. If none of the options work out for you, then consider paying back your creditors through a court monitored repayment plan.