Debt settlement is effective. Those who have gone through the program and was able to successfully negotiate a debt reduction can attest to this. While it cannot be denied that there are many risks to this program, the fact that people have achieved debt freedom from it, proves that it can solve your debt problems.
This debt relief program aims to give consumers a debt reduction. To do that, you have to convince your creditor or the collector handling your account that you are in a financial crisis. And to make them believe it, you have to start defaulting on your payments. You will negotiate with them to allow you to pay only a portion of your debts. Once you agree on an amount that is often times lower than your current, you will pay that off and whatever is left of your debt will be forgiven by the creditor/collector.
But once you have achieved your debt freedom, there are still some things that you need to do. Settling your credit card debt is not the end of the journey.
It is just the same as dieting. When you have achieved your ideal weight, you don’t stop there. You change some things in your life permanently to help you avoid gaining what you lost. The same is true after you get your freedom from debt. There are a couple of tasks that needs to be accomplished to solidify your current financial situation.
How to clean up the pieces after settling your debts
So what are the things that you have to do? Well most of the things that you will do at first involves cleaning up the pieces of your financial life.
Keep the signed settlement document. This is your proof that after you have paid off the agreed settlement amount, you will no longer be pursued for this type of debts. You have to know that there are some collection agencies who buy old debts and come after the debtor – even when the debt is paid. If that happens to you, this is the document that you will show them.
Get a copy of your credit report. A few weeks after your payment is cleared, get a copy of your credit report and see if your file had been updated. You can get a free copy from the Annual Credit Report website. Check if the debt is still reflected there. If yes, then you can call your creditor/collector and remind them to file the update already.
Start increasing your credit score. There are many ways to fix your credit score and that begins by using your credit card now and then and paying off the purchase immediately. If you send the payment within the grace period, you don’t have to worry about any interest.
Reassess and revise your budget plan. Now that you have your debt out of the way, you can revise your budget plan to remove it from your expense list. It is highly advised that whatever you have saved from the debt payments be transferred to your savings account.
These are the tasks that you need to accomplish immediately after you have paid off your debt (except for the credit report). By doing so, you can arrange your life in such a way that will suit your new found debt freedom.
Tips to live a debt free life after debt settlement
But even as a person who lost weight continues watching what they eat, there are still some things that you have to continue doing so you can stay debt free. Just as you can gain weight almost immediately, you can also put yourself in debt easily if you are not careful.
Just think about what debt free people do with their lives. They display certain traits and apply practices that ensure they will not be put in a debt situation. If you want to be like them, here are the things that you must do.
Live within your means. Debt signifies that you had been spending more than what you actually make and that is one change that you have to implement. Stop overspending and just keep to the limits of your income. If you cannot afford to buy something, do not buy it.
Analyze every purchase. Smart spending is a must to keep to a debt free life. Here’s the thing, even if you can afford it, it doesn’t mean you should have it. Like that luxury car that you want to buy. Even if it looks good and you know that you can afford the monthly payment on a car loan, it doesn’t mean it should be bought. Think about the gas consumption and the money wasted on the interest of the loan. Even if you can pay for the car in cash, you still need to think whether it is the right thing to do.
Save for the rainy day. Another important habit that you need to develop is saving. This is one of those that will also keep you from incurring debt ever again. You can make the right choices and live within your means but if you do not have enough money for emergencies, you can end up in debt as well.
Grow your money. After all of this, you may want to think about growing your income. Remember that the cost of living continues to rise and you need to make a way to have your income grow too. You can invest some of your savings or you can find another source of income.
Debt freedom does not really mean you have to sit back and relax. You will not be as stressed as before but you still need to keep a close eye on your expenses to make sure that you will never land in the same position again. That is the smart way to do it after you have gone through the damaging effects of debt settlement.