Debt settlement can help you in getting rid of your debts when you cannot pay the outstanding balance in full. Check out how it can help you solve your financial problems.
When to go for debt settlement
You can go for settlement when:
- You havent been able to make bill payments for some months
- Creditors and/or collection agencies are harassing you for payments
- You can pay a percent of your outstanding amount
- You want to get rid of your debts as fast as possible
Debt settlement/negotiation is a debt relief option wherein you get rid of your debts by paying an amount which is less than your current outstanding balance. It is a way to get rid of your bills fast
Non profit debt settlement program - What it is
Non profit debt settlement programs function in the same way like any other settlement program. Know about how you can become debt free by enrolling in a settlement program. The nonprofit debt settlement companies have received non profit charitable organization status from IRS.
Have a look at the following example
- Your outstanding balance on: CC1 - $50,000 and CC2 - $75,000
- Both the creditors agree to reduce your payoff amount by 50%
- Now you have to pay: CC1 - $25,000 and CC2 - $37,500
- Thus, you save $62,500 instead of paying $125,000
How much to save through settlement
Note1: CC - Credit Card
Note2: The amount you save through settlement can be regarded as your taxable income and it can be taken into account in your federal tax calculation
Must-haves for non profit debt negotiation
The non profit debt negotiation agreement should have:
Name of the company along with its address, licensing number, phone no., e-mail and other contact information
Professional services offered
Written document detailing the list and description of professional services mutually agreed upon
Timeline to be debt free
Within how many months youll be out of debt if you continue making the monthly payments
Exact amount you need to pay for the professional services offered by the settlement company
Monthly installment amount
How much amount you need to pay to the settlement company every month
Clause of cancellation
The companys policies and procedures of cancellation are clearly mentioned
Details of how and under what circumstances you can nullify the agreement
You have to look at this before signing the negotiation contract with the company
Myths and truths about non profit settlement
Myth: You do not have to pay a professional fee when you get help from a non profit debt settlement company
Truth: Usually, the non profit settlement companies don't offer settlement programs at free of cost. However, the companies, offering non profit debt relief solutions, receive donations from individuals and companies; so, they may charge less for offering such programs.
Myth: Debt consolidation and debt negotiation/settlement are same
Myth: Settlement does not affect your credit score
Truth: In reality, it is highly likely that your credit score will get reduced when you opt for settlement. This is because, the status on your credit reports is updated as Paid as settled.
Myth: All non profit debt settlement companies are trustworthy
Truth: A non profit debt negotiation company will not be trustworthy just because it is a non profit organization. Always check out BBB (Better Business Bureau) ratings and customer reviews in order to choose a reliable settlement company.