When you think about debt settlement, do you picture a huge pile of cash being handed to you? Or do you imagine being able to eliminate half of your debt? If you are in deep debt and struggling to meet minimum payments, debt settlement may be a good option for you.
Debt settlement is debt relief that does not require you to go to court or threaten your creditors. Instead, it means that a lender has agreed to take less than the exact amount you owe as payment in full. It means that collectors can no longer hound you for your money and you do not have to fear that you may get sued for your debt. Debt settlement can ruin your credit, though.
In order to understand why debt settlement is a better option than bankruptcy, it helps to understand how debt relief actually works. When you get behind on your bills, you will probably start to struggle to pay them. If you have a lot of debt, it can get really difficult. If you just have minimum payments, it can still get hard. When you are in this situation, you can contact a reliable debt relief company and let them negotiate a debt settlement for you. The creditor agrees to take a percentage of the outstanding debt so that you can afford to make the monthly payments.
Before you start the debt settlement process, however, there are a few things that need to be done in order to protect yourself. First, it is best to stop making new applications for loans. Having too many open accounts can also negatively affect your credit score, so the more debt you have, the worse it looks. If you have any outstanding loans, use them as much as possible to settle the debt before making another application for credit. Do not use any credit cards to settle the debt because this counts as a new application, and can hurt your score even worse.
Once you have settled your debt, you should make a list of all your creditors. You should also list the amount of debt that you have settled. This will help you in the debt negotiation process. If you can show a total of all the debt that has been settled, you will have an advantage over other creditors negotiating on your behalf. As long as you have the information that you need, you will do well in the negotiations.
When you are negotiating your debt settlement, you will also want to keep your creditor happy. If you make your payment late, it can often be more of a hassle than the actual debt itself. If you settle the debt quickly and keep the payment current, your creditor may be willing to reduce your debt. If they are unwilling to do this now, ask for a higher settlement amount and see what they offer.