Debt settlement is basically a negotiation achieved with the unsecured lender of a consumer. Most commonly, creditors agree to settle for a big percentage of the debt: sometimes as much as half, although results may vary widely. When settlements are final, these terms are laid in writing as a legally binding contract. The debt is paid in full at this point. Settling involves a lot of difficult work by negotiating with creditors and convincing them you have no way to pay them back. The process can take several months before the entire process has been completed.
Debt settlement was introduced in 2021, when the economy faced a serious crisis and many people found it impossible to meet their minimum monthly payments. This was a major catalyst in the rise of bankruptcy throughout the country. In the United States, settlement of debt became popular and encouraged lenders and borrowers to settle their accounts instead of filing for bankruptcy. Since bankruptcy has such a negative impact on the credit report, lenders are eager to settle debts.
What does debt settlement mean? Negotiating is done with the help of a neutral third-party, usually a professional lawyer or debt relief company. The goal of a negotiator is to get you a better deal than you currently owe. You do not need to pay money to the negotiator as the settlement amount will be taken from your savings or from any other income sources you currently have. Once all the money has been saved, you will have to begin the process of paying the rest of your debt.
As with all debt settlement processes, consumers are charged a fee for negotiating and settling their accounts. These fees cover the costs of the settlement and may also include the administration costs required by the creditor. These fees are included in the debt settlement quote you receive; it is important to compare this with the total of what you owe to make sure you are getting a good deal. You can do this for free at various online sites run by consumer advocates.
Another thing to keep in mind is that the vast majority of consumers have successfully settled their debts without outside help; they did it on their own. The only exception was when consumers enrolled debt settlement programs to get additional help settling their debts, but these programs are not free and consumers ended up paying large fees for enrollment. For this reason, it is important to remember that you cannot stop the collection calls and other notifications from creditors once you have enrolled.
How do you know how much you should settle your debts for? Your debt relief company will advise you based on a number of factors including the age of your debt, the interest rate, the outstanding balance and the length of time you have held your accounts. This is why it is best to speak with a trained counselor to help you decide how much to settle. You will also want to check with your state’s attorney general to ensure that the consumer debt settlement laws apply to your situation.
Once you have settled your entire balance, the debt settlement counselor will negotiate with your lenders on your behalf. There are some things that the counselor will do on your behalf as well. They will begin the negotiation process by making contact with your lenders, often on your behalf, to reduce the total amount you owe and possibly eliminate some fees or penalties. Once they have negotiated a reasonable payment amount with your lender, you will be notified of the final amount and you will then pay it in full to eliminate any remaining fees.
In conclusion, there are several key takeaways that you should keep in mind when looking to pay off your unsecured credit card debt. The first step is to determine how much you can afford to pay monthly and to go after your entire balance once you have reached this amount. The second step is to find a debt settlement program that is suitable for your financial situation. The third step is to make sure that the debt settlement program you are working with is backed by a reputable third party. These three key takeaways will help you find the cheapest way to settle your credit card debt.