It’s no secret that debt settlement offers benefits that other methods of managed debt relief can’t match. The process is regarded as a viable alternative to bankruptcy precisely because it can produce superior results in a relatively short period of time.
Debt settlement is also more cost effective than other forms of debt relief. For instance, debt consolidation loans can take years to repay and may actually end up working against the folks that use them. Over the years, these credit facilities have driven thousands of borrowers into bankruptcy.
Since they’re liable to carry high rates of interest and demand long terms of repayment, some debt consolidation loans actually cost more than the credit card balances and medical bills that they seek to replace. This comes as an unpleasant surprise to the borrowers who thought that these loans would help them pay down their debts.
Most debt consolidation loans also come with strict repayment plans that allow little room for error. Even a single missed payment on one of these loans might cause ruinous rate spikes that negate the loan’s promised savings. In short, debt consolidation loans clearly come with too many strings attached and fail to produce optimal results on a consistent basis.
The primary alternative to this sub-standard form of debt relief is debt settlement. While the benefits of this process might be obvious to anyone who approaches the subject with an unbiased mind, debt settlement is shrouded in uncertainty and cheapened by rumors. If you know that you need professional help to put your debts to bed and aren’t convinced that a debt consolidation loan is right for you, read on for some key bits of debt settlement advice.
First, debt settlement works differently than other forms of debt relief. Unlike credit counseling and debt consolidation loans, a debt settlement workout can reduce your debts’ principal balances. This reduces your overall debt burden far more quickly than interest-rate reductions.
It produces more savings in the long run as well. Most debt settlement programs need just 24 to 48 months to work. While you’ll take an immediate hit to your credit upon signing up for your program, you’ll be able to start rebuilding your financial identity as soon as you’ve paid off your debts in full. That’s a powerful incentive to start saving and stop using credit.
To get the most out of debt settlement, you need to understand how it works. It’s a hands-on process that involves lots of back-and-forth negotiations between your debt settlement provider and your creditors. The trained negotiators at your debt settlement provider make settlement offers to each of your lenders and apply targeted pressure to increase the likelihood of acceptance.
Unfortunately, your creditors aren’t required to agree to settle your debts. While most eventually will acquiesce to your debt settlement provider’s demands, there may be some suspenseful moments along the way. You’ll want to do everything in your power to increase the chances that your creditors will accept your provider’s offers.
You can start by treating each lending organization respectfully in the months leading up to your debt settlement case. Even when it becomes clear that you’ll be unable to pay off your debts, continue to make a good-faith effort to pay. This shows your creditors that you care about your reputation and your integrity.
Likewise, don’t let any organization to which you owe money goad you into losing your temper. This can be especially difficult with collection agencies: These outfits thrive on disrupting the good humor of borrowers everywhere and seem willing to do anything to get their targets riled. If you take the bait, you could seriously complicate your case and reduce the likelihood of its reaching a successful settlement.
Your kindness should have its limits. For instance, you must remember to stop making payments on your debts once you sign up for your debt settlement program. Although your creditors would love to keep receiving monthly checks from you during the negotiation process, you’re under no legal obligation to continue to make your payments once the process begins.
In fact, you should use the negotiation period to save funds for your final settlement payment. To minimize confusion and ensure that you’re on the same page with your creditors and debt settlement provider, make sure to get this settlement agreement in writing.
I am an associate at National Debt Relief, which is a Debt Consolidation Company that has helped thousands of Americans facing credit card debt problems. We help with debt settlement, debt management, and other debt related financial crisis' facing consum