A debt settlement is where a creditor agrees to collect less money than what is owed to them. This happens when you are unable to pay the full amount owed. This is usually characterized by you falling behind on your payments for many months or when you have multiple skipped payments. The creditor will have reason to believe that you cannot pay the full amount owed. No creditor will agree to offer debt settlement if they have any reason to believe that you can make the full payments.
The main aim of debt settlement is for you to reduce a number of unsecured loans that you have, for instance, if you have credit card loans. It won’t work if you there is security for the loan, for instance, if you have a house or a car that can be repossessed. It only works if the only alternative is you not paying the debt at all. Once you have decided that you want a debt settlement, here is what you should generally expect.
Call the company
Get in touch with the company that you want to help you. Explain to them what your situation is. Inform them who your creditor is and the amount of money that you owe them. The company will then give you an estimate of how you can reduce your debt and tell you the new lower monthly payments that you can make.
While you can choose not to use the services of a negotiator and do your own negotiations, it is generally advisable to hire one. They have the experience and the expertise to get you a good deal with your creditors.
Once you have reached an agreement with a company such as Creditors Relief, it is advisable that you no longer deal with your creditors directly as the settlement company will now be the ones to deal with them. You will then be expected to make monthly payments in a savings account.
The debt relief consultant will advise you on how to raise some extra cash by showing you how you can reduce your business expenses. Once these savings have accumulated to a sizeable amount, the company will get in touch with the creditors and negotiate new terms with them that will see you paying much less than what is owed.
You can agree to pay a lump sum to clear the debt, or you can make lower monthly payments.
Make a settlement
If the creditors agree to this, the payment will be made and the settlement company will charge you a fee for their services. This can be a percentage of the amount owed or it can be a flat fee. It depends on what your agreement with the company was.
As much as you are working on debt settlement, it is also important that you identify the root cause of your financial problems. This will prevent you from getting into any more financial trouble. Follow your financial advisor’s counsel and stay on a budget