Debt Settlement- FAQ
What is Debt Settlement?
In order to lower your debt amount and enable you to repay a lesser amount of money than you actually owe, your creditors need to be negotiated with. This process of negotiating is called debt settlement or debt negotiation. For this debt settlement process to work it would have to be for unsecured debts such as credit card debt; secured debts like home mortgages and auto loans cannot qualify for debt settlement. Also, you have to actually be significantly behind on your bills in order for creditors to agree to settle your debts at a lesser amount. Typically, debt settlement can lower your debt amount by 40%-60%!
Does Debt Settlement Really Work?
Debt settlement most definitely works, especially for those who are extremely behind on their bills and are contemplating filing for bankruptcy. Those who do not have a lot of debt or can manage to pay their bills are not likely to qualify for this debt settlement process. The aggressiveness of debt settlement makes it a process that is not suitable for every situation, however it is a proven method and a great way to get out of debt when necessary.
How is it Different From Debt Consolidation or Credit Counseling?
Debt consolidation and credit counseling lowers your monthly payments, fees, and interest rates, however they are more traditional debt reduction options that do not actually lower the amount you owe in debt. Debt consolidation programs can be very useful because they help you get out of debt faster by reducing your interest rates. In addition, debt consolidation programs can help you pay more towards the monthly-owed debt amount, while allowing you to pay less in interest. Furthermore, with debt consolidation or credit counseling, you do not have to be considerably behind in your payments like you do in order to qualify for debt settlement.
Will Debt Settlement affect My Credit Score?
Yes, Debt Settlement can adversely affect your credit rating.It can lower your credit score although it will not ruin it. Debt settlement is recorded on your credit report (which gives a breakdown of your entire payment history and the amount of debts you may owe), therefore it may indeed have somewhat of an impact on your overall score. However, having a substantial amount of debt lowers your credit score, and if you have very high debt, it will be extremely difficult for you to convince lenders to give you a loan. In order to get loans, you need to have good credit, and the more you owe, the lower your credit score will be. Therefore, debt settlement is ultimately the best choice even if it may lower your credit score, because you will have the ability to get out of debt faster while saving a considerable amount of money. Getting completely out of debt is worth a slight credit score reduction for most people, especially since high amounts of debt will lower your score tremendously anyway.
Can My Credit Be Repaired After I am Done With Debt Settlement?
Absolutely! Believe it or not, you can request the removal of any negative information from your credit report. In order for this removal process to happen, your information must be correctly verified, or the credit bureaus must remove it themselves. This will help your credit get right back to normal.
I Haven’t Missed Any Payments, Can I Still Use Debt Settlement?
The answer to this question solely depends on the company you choose to work with. There are debt settlement companies that prefer for you to have sizeable financial hardships, while other companies do not require this at all. The companies that do not require for you to currently be in financial adversity often request for you to stop paying your credit card bills and send that money to them directly; this way, you would have established a savings plan that will accumulate enough money for a settlement while they concurrently negotiate with your creditors. All in all, debt settlement can be an option if you are not currently behind on your credit card payments, especially if you are struggling to pay any other bills you may have.
Isn’t Using Debt Settlement Like Cheating?
Debt settlement is a legal debt reduction solution that is completely honest and a great way to get out of debt if you’re struggling. It isn’t fair for credit card companies to constantly raise your interest rates, increase your credit limits, and regularly send you credit card offers when you are behind on your bills. This only gets you further into debt, and the credit card companies are completely aware of that. Therefore, it is awesome when credit card companies are willing to settle debt with their customers. Do not view this process as cheating, if debt settlement is right for you, then go for it.
Is Debt Settlement Right For Everyone?
The aggressiveness of debt settlement is not meant for everyone. It can most definitely help you get out of debt faster, but you should ask many questions and take your time. To help you decide whether or not debt settlement is right for you, most debt settlement companies offer free consultations. Be sure to learn as much as you can about the debt settlement process.