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HomeBlog Debt SettlementDebt Settlement – 7 Truths Everyone Struggling with Debt Needs to Know
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Debt Settlement – 7 Truths Everyone Struggling with Debt Needs to Know

January 7, 2017 by National Debt Relief

need to consolidate debtWhat exactly is debt settlement? According to Wikipedia it’s a way to approach debt reduction where the debtor and creditor agree on a reduced balance that the lender then treats as payment in full.

Debt settlement has proven to be a godsend for thousands of Americans who found themselves deep in debt with no hope of ever getting out of it.

If you find yourself in this position debt settlement could be your best hope.

But before you rush off to contract with a debt settlement company there are truths about debt settlement you know and here are seven of them.

Debt settlement is not a right

No law makes debt settlement a right.  Lenders are encouraged to be open to debt settlement when borrowers are in terrible financial shape but they’re not obligated to agree to settle or to accept your terms. The only right you have is the right to apply for debt settlement but this is as far it goes. The laws and regulations published by the Federal Trade Commission and the Consumer Financial Protection Bureau are there to protect you from abusive practices, harassment and to prevent you from being swindled but there is no law that lenders must settle any debts.

Creditors may say no

When a company such as National Debt Relief first approaches a lender with a settlement offer, the lender may very well say no. In fact, this is very possible. However, a reputable debt settlement company will not give up. It will continue doing its best to reach a settlement with that lender. This is one of the best reasons to hire a debt settlement company. Its debt counselors are trained to be patient and persistent and to continue contacting that lender until they can reach a settlement that’s fair to both it and to you.

It may not be their favorite option

There are a several different options for debt relief such as a debt consolidation loan, a balance transfer or credit counseling. Credit card companies also have alternatives to debt settlement they may prefer. Their decision to settle or not settle will be based on the debt counselor’s skills and your financial situation. In some cases, a lender may offer to lower its interest rate – in lieu of settling the debt – or to waive payments for several months so that you’d have time to get organized and caught up on your debts. There are credit card companies that will also offer to convert the debt into a loan with fixed monthly payments and a fixed term.

Using a debt settlement company costs money

Debt settlement companies are for-profit companies and they charge for their services. Many of them charge a percentage of the amount of debt that’s being settled. This can vary from 15% to 25%. However, even at this a good debt settlement company can save you money. Here’s an example. Let’s suppose that you owe $17,000 in credit card debts. It’s likely that the debt settlement company could settle those debts for 50% of their balances or $8500. Let’s further suppose it charges a 20% fee or $3400. In this case, you would still save $5100, which is definitely nothing to sneeze at., Plus using a debt settlement company would save you from the pain and harassment of having to deal with angry lenders and nasty-tempered debt collectors.

Not everyone can use debt settlement

couple analyzing finances

Lenders will rarely, if ever, discuss settlement unless you’re at least 90 days behind on your bills and owe more than $8000.

Also, there is a point where most lenders will write off your debt and sell it to a debt buyer or debt collection agency. Once this happens, not even the best of the debt settlement companies can negotiate a settlement because the lender no longer has any reason to settle. This can happen after 90 days or 120 days depending on the lender.

Debt settlement will have a bad effect on your credit score

No one knows precisely how much debt settlement will affect your credit score but it will damage it. The website Credit says that debt settlement can hurt your credit score almost as much as a bankruptcy. There are two reasons for this. First, the debt settlement company may take three or even more months to settle a debt. This is a time when no payments are being made on your debts so they will be reported to the credit bureaus as late or even as in default.

Second, when you have debts that were not reported as “paid as agreed,” or “paid in full” this will definitely cause your credit score to take a hit because you did not live up the promises you made when you borrowed the money.

If you need more information as to how debt settlement will  effect your credit score just watch the following video.

You can settle debts yourself

There’s nothing that says you can’t settle your debts. In fact, that’s much cheaper than using a debt settlement company where you would be charged a fee. But there are a couple of reasons why most people choose to use a debt settlement company.

You’ve already read one of them. It’s that using a settlement company frees you from the burden of having to deal with your lenders and debt collection agencies, which can be both angering and frustrating.

Second, it’s almost impossible to settle a debt unless you can offer to make an immediate payment to the lender in the form of either a cashier’s check or wire transfer.

What this means is if you were able to settle a $7500 credit card debt for $3500, you would need to have $3500 ready to send to that lender. The sad fact is that people who are struggling to repay their debts rarely have enough cash available to make that kind of payment.

A third reason why people turn to settlement companies is because they understand they aren’t good negotiators.  It takes skills and experience to be a good negotiator and most people lack both. Negotiating with a lender to settle a debt can be a difficult and scary experience and most people choose to not have to deal with it.

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National Debt Relief

National Debt Relief is one of the largest and best-rated debt settlement companies in the country. In addition to providing excellent, 5-star services to our clients, we also focus on educating consumers across America on how to best manage their money. Our posts cover topics around personal finance, saving tips, and much more. We’ve served thousands of clients, settled over $1 billion in consumer debt, and our services have been featured on sites like NerdWallet, Mashable, HuffPost, and Glamour.

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"National Debt Relief is like a headhunter. Until you sign up..."

Moderate National Debt Relief Caller: Charlotte Transcribed WE 1/24/2021 Charlotte: Before I begin, I have to let you know that our call may be recorded. Can you tell me, how did you first hear about our National Debt Relief? JOAN: Oh, I don't know. I don't remember. I don't know how I heard about it. Charlotte: What made you decide to work with them? JOAN: Well, obviously, I needed to consolidate my debt. Charlotte: Tell me about the service program that they provided you with. JOAN: Well, I'm not done. But for me, it’s costly. What I did not like about it was that they add on. They say it's going to be X amount of dollars. But then what they do is they say, “Oh, well, we found another creditor that you need to…” So that'll be at a different part of the month and I don't like staggered bills. If I'm gonna pay a bill, whether it's to the phone company, the insurance company, whatever it might be, I want to pay that bill once a month. That's the only drawback. Charlotte: So let me get this. Normally, they are collecting the bills upfront. And then they work to get them paid off at a different rate. So everything wasn't collected all at once, if that's what I'm hearing correctly. JOAN: No, no, no. Every month, money is taken out of your account. And they pay X amount of dollars. Like let's say you owe $5,000 with Citibank, $500 in Credit One, whatever. They work out a deal with them and then they say, “Well, you have to pay $350 a month.” And they'll pay $20 a month towards -- they give you like around about how long it's going to take. Two years, two and a half years. And then they work it out that way. Charlotte: Now, what did you think about your negotiator? JOAN: I don't know. I just called up. It's a completely different department. So when you call up to sign up, it's very different. I don't remember that. It's just that they collected all the information. It was easy for me. I didn't have to go through and find whatever bills I wanted to put in the debt relief. They did that. Charlotte: So say you have questions or concerns. How did you get your questions or concerns addressed? JOAN: I would just ask and they answered it. They're very helpful like that. They'll answer any questions you have. And if they don’t know, they will find out. Charlotte: So was there not a particular person that you spoke with? JOAN: No, you don’t have one person that you deal with that just handles your account. Once you do – they’re like headhunters. Until you sign up, you're going to have that one person and even other people calling. Once your name is out there, they're going to keep calling you. So, once you sign up, then it's whoever answers the phone. It’s customer service. Charlotte: How comfortable did you feel working with National Debt Relief through this process? JOAN: I felt very comfortable, very safe. I was not worried about anything. Charlotte: Is there anything about this process that you would have liked to seen handled differently? JOAN: Yes. The way the payments come out. I'd rather have them one instead of … Charlotte: Everywhere. JOAN: Right. Well, not everywhere. For the most part, the bulk of them were. But then if there's one here, one there, they don't just extend it to another payment. And then the payments change, like the payment amount. You could pay $20 for six months, and then all of a sudden, it's $80 for the next three months, so you really don't know. Charlotte: So if you have to rate this experience on a scale of one to five, five is you’d recommend to friends, one you're pretty dissatisfied… JOAN: No. I would definitely recommend it to a friend. Charlotte: How would you say working with National Debt Relief has impact your life? JOAN: Well, it did help until I hit a speed bump. I'm in the middle of a divorce and my husband closed our checking account, of course. But so far, as a matter of fact, that's why I thought you were calling. I have to postpone the next month, so hopefully, they'll be able to postpone it, because I've been postponing it for a few months. Charlotte: Would it be okay if I posted your comments as a review on our public website for National Debt Relief? Because you did give us some really good feedback. JOAN: Yes, but not using my name. Charlotte: Okay, I will make it anonymous for you. I will also send over a link so that you can have it as a record for yourself at jdola20@yahoo.com. JOAN: Yes, but do not put that public. Charlotte: Oh, no, no, no. That doesn't go public. Definitely. How would you say working with National Debt Relief has impact your life. JOAN: Well, really, it would have helped if I could have stayed on the program. Charlotte: We’re recorded.

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