The Real Deal on Debt Settlement
Are you in over you head with debt? Do you lie awake at night, wondering how you will possibly repay all the money you owe? Even if your unpaid debts have ended up in the hands of a debt collection agency, you still have a few options to get your finances back under control. You will have to do your research, however, to decide which option is the right one for you.
How a Paid in Full Debt vs Settlement Affects Your Credit Report.
A debt that is paid in full will always reflect better on your credit report than a debt that is settled. When you settle a debt, you are agreeing to pay less than the amount you actually owe. This will have a negative effect on your credit report and will remain on your credit score for seven years. Unfortunately, you may not have the funds to pay your debt in full and may need to consult with a debt settlement company.
How Do Debt Settlement Companies Work?
Debt settlement companies offer programs that allow you to pay back a lump sum of your debt, which is usually less than the actual amount you owe. For example, you may have an unpaid credit card balance of $20 000. You may reach an agreement with the debt settlement company to repay $15 000, leaving a credit card debt forgiveness of $5 000. The debt settlement companies will then contact your creditors and discuss this debt settlement negotiation. How much will the debt collectors settle for? Well, that depends on your financial situation and what you can afford to repay.
What Happens After You Pay
Once you have negotiated a repayment amount, you will receive a debt settlement letter, or a credit card settlement letter, from the debt settlement company. This letter will outline the original amount of the debt, the agreed amount to be repaid and the terms of the repayments (either lump sum or installments). If you cannot repay the lump sum, you will need to make monthly deposits of an agreed amount into a special savings account until the debt is repaid. This may take anywhere up to 36 months. One of the drawbacks on this type of debt settlement is that the programs often encourage you to stop paying your creditors directly. This may have a negative impact on your credit rating as the debt may still be attracting interest and late repayment fees.
How to Choose the Best Debt Management Company
There are many debt management companies out there and not all of them have your best interest at heart. Some companies try to take their fees from you before they have settled any of your debt, while others may promise to settle your debt and fail to deliver. It is vital that you thoroughly research the debt settlement companies before you commit to them. You can check if they have any consumer complaints against them by contacting the state Attorney General, the local consumer protection agency or simply by searching the internet. There are however, some fantastic companies such as New Era Debt Solutions. They offer strong customer service and sensible advice – even if it means recommending alternatives to debt settlement if it isn’t appropriate.
When You May Need a Debt Settlement Attorney.
If you have a significantly large unsecured debt or haven’t been successful with a debt settlement company, you may want to consider consulting a debt settlement attorney. A debt settlement attorney can guide you as to the best way to repay your debt and minimize your risks legally and to your credit rating. Most debt settlement attorneys do not charge up front fees, but will take a percentage if you win your case. This rate will vary depending on your circumstance, so be sure to establish what the fee will be up front with your lawyer.
Is There a Credit Card Debt Relief Government Program?
Although there are a small number of government programs for debt such as mortgage debt, there is actually very little government help with credit card debt. Most people with unsecured debts, either from credit cards or personal loans, will need to consult with civilian companies.
Debt can undoubtedly be overwhelming and it may seem impossible to ever recover from the pressure. However, there definitely several options available to turn your finances around. It is best to thoroughly research which solution is best for your particular situation, and be sure to stick to whichever program you choose. It may take some time, but eventually you can recover from what may seem insurmountable at the moment.