Debt Settlement Companies
Are you looking at a stack of unpaid credit card bills that you have suddenly accumulated in recent months and that you have no idea how to get rid of? Regardless of how you found yourself in this financial bind, we can provide you with information on a variety of debt relief services designed to help you manage your budget, keep track of your expenses, and pay down your debt. One option that has become a popular form of debt relief for many consumers is to seek the services of debt settlement companies.
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Under a debt settlement program, or what some people refer to as debt negotiation, companies may agree to settle or forgive your debt for a substantially lesser amount than what you owed. With this approach, debt settlement companies will typically advise their clients to stop paying their bills and save up money in order to accumulate a lump-sum amount that can be used to extend a settlement offer to a credit card company. If you're wondering why your creditors might be willing to settle for a much lesser amount, then you have asked the question that most consumers come up with when considering debt settlement. The answer is: If credit card companies decide to "sell off" what they consider to be "bad debt" - meaning, the amount they are unlikely to be able to collect from you - to a third - party debt collector, they may often receive as little as 10 cents on the dollar.
However, if those credit card companies understand that you are going through a financial hardship and they receive a reasonable offer to settle from you, or made on your behalf by a debt negotiation company, they may be willing to agree to settle your debt for less than what you currently owe.
Debt Management: A Viable Alternative
Debt settlement differs from other debt relief services such as debt management programs (DMP) or debt consolidation in many areas. Under a debt management plan, also called debt consolidation, all your high interest debts may be consolidated into a single, more structured, and more affordable payment each month. With this approach, you will work with credit counselors who will make proposals on your behalf - proposals like waiving fees and penalties, and getting a lower interest rate - to your creditors, who once they understand your situation, may agree to a repayment plan that is, hopefully, more affordable for you. We can help you get more information about the different services available to you, including debt consolidation, and the potential money-saving benefits they offer.
If debt settlement sounds like it may be a good option for you, be aware of the potential outcomes and risks of this approach. First and foremost, consider the cost and time involved. Many debt settlement companies charge hefty fees - typically 14 percent to 18 percent of the total value of the debt you want settled. Others may charge a percentage of the debt savings once you settle. The good news is, the Federal Trade Commission (FTC) now requires debt settlement companies to make specific disclosures to potential clients - such as how long it will take to settle their debts, how much the service will cost, and the potential negative consequences that could result from getting debt relief services.
This law, which became effective late in 2010 was made in response to the thousands of complaints received by the Better Business Bureau (BBB) about debt settlement companies with deceptive practices that have driven people deeper into debt. If you want to guard yourself against unscrupulous debt settlement companies, make sure that you thoroughly investigate the company you might be working with. Some consumers may also look at a company's BBB rating, which in some cases, is an indication that it has sound and trustworthy business practices. But, keep in mind that ratings like these are just guidelines for consumers, and it is still in your best interest to research a company's policies and fees as thoroughly as you can.
Also, keep in mind that debt settlement may have a negative impact on your credit; some creditors may even sue you once they find out that you are working with a debt settlement company. In spite of this, many consumers still seek debt settlement companies and decide that it is still better than declaring bankruptcy, which is often a last resort because the consequences on their credit are more far - reaching and long - lasting.
In spite of the potential risks involved, debt settlement remains a viable option for many consumers who truly want to settle their debts for much less than what they owed.
Get a Clear Picture
So before you sign up in any debt settlement program, make sure that you understand all the terms involved like how much you are likely to save, how long it will take you to save up the lump sum (settlement) that you will pay your creditors, and what impact is may have on your credit. The good news is that you do have debt relief options, just make sure you do your homework, choose wisely, and have a clear picture of the debt relief program you are considering.
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