The Truth About Debt Settlement

The Truth About Debt Settlement

The average person is carrying debt whether it is on a credit card or paying off a mortgage. The interest that can accumulate on a credit card is nothing short of terrifying for many. Credit card companies want to earn interest so they will give many customers a higher credit limit than they could pay off immediately. Poor decisions when you are younger can haunt you for years in terms of racking up credit card debt.

Debt settlement can be a huge assistance to an individual that simply cannot seem to get out of debt. A debt settlement company is going to help their customer by negotiating with creditors. The process can help you avoid bankruptcy which can be a huge blemish on your financial record when trying to get a mortgage or other loan. The debt settlement team will help you reduce the amount of debt that you have.

The reduction of the debt that you have will require a one-time lump payment to settle the debt. Far too many people do not realize that this is a solution and file for bankruptcy due to poor financial advice that they receive. The process can take a few years so it will require patience and quality debt settlement professionals.

How Debt Settlement Can Help Your Credit Long-Term

Debt settlement can have an immensely positive impact on your credit. Some strategies will lower your credit score before ultimately increasing over time. Debt settlement companies in many circumstances tell clients to skip payments to save up for the lump sum payment. Keep in mind that utilizing a quality debt settlement company is important as they work with the creditors frequently.

Your credit score can lower when a creditor does not accept payment terms for debt settlement. While paying off the debt there will be on-time payments showing up which will improve your credit. Look at the health of your credit score as a long-term project as there is not a quick fix for credit when you are far in debt. A dip in your credit score is far better when it comes to future financial negotiations than if you have filed bankruptcy once or multiple times.

Below are alternatives if you are in a small amount of debt:

  • Picking up extra shifts or finding supplemental income to pay off the debts in a timely manner. Debts with low-interest rates are far more reasonable than credit card debts so pay off the high-interest debts first.
  • Selling or refinancing personal assets like a home or vehicle can help you get out of debt.
  • Waiting around until your debt consumes you and it becomes nearly impossible to deal with.

Savings are a Reality

There have been numerous studies done that show the benefits financially of using a debt settlement company. The savings show that most clients save around 2.5 to 3 times for every dollar paid to the company. The debt settlement process does take one to a few years depending on the amount of debt so do not think that it will be a quick fix but it is the best option for a large number of people in debt. Fixing your credit can allow you to successfully apply for a mortgage or live a higher quality of life without financial stress.

Debt Management Plans

Debt management can seem overwhelming unless it is broken down into simple steps. A debt management plan will include:

  • Creation of a budget. There are plenty of people that are in debt due to their mismanagement of money or living above their means.
  • Target those debts that you will pay off first.
  • Set milestones and goals for the debt being paid off.
  • Reach out to those that you owe money to ask for more favorable terms. Most companies just want their money rather than to battle it out or send the debt to collections.

Debt management plans can be coupled with debt settlements as saving enough money for the one-time payment is important. If you continue to rack up debt even the payment that the settlement company has negotiated will be too much.

What Can Go Wrong With Other Alternatives

There are alternatives to debt settlement that can work for a person depending on their financial scenario. The following are a few options other than debt settlement:

  • Debt consolidation is an option for those that have a high credit score despite being in large amounts of debt. Taking out a loan to pay off current loans to consolidate can be an option for those that owe quite a bit of money to various companies. The interest rate or late payment penalty will be far more reasonable with one loan versus falling behind on various debts.
  • Professionals should handle debt consolidation but for those that have a background in finance, the answer could be to negotiate for yourself For those people that are very far in debt to a company, the number an amateur will negotiate will not compare to a professional debt settlement negotiator.
  • Transferring debts onto a credit card or via a loan to get a better interest rate is a short-term fix. To get rid of debt and start your path to debt relief, you need to hire professionals. Carrying debt on a high-interest credit card is rarely the best option.

Financial stress can top nearly any other type of stress as it can break up marriages and families. The ability to have a final number that you will need to pay can be a huge relief to you and your family. The choice is yours to take back control of your finances rather than be constantly harassed by debt collectors. Quality debt settlement professionals can truly save you financially and will outweigh the fees associated by far. Changing your lifestyle is going to be a requirement until you have finally paid off your debt and can start truly living without worrying about money.