Debt Settlement Basics
When you are in debt over your head and you know there is no way out on your own you may be need to think about trying to reach a settlement with your creditors. Your situation is not unique. Most people have found themselves with financial difficulties at some point and sometimes settlement is the best option. Debt settlement is a serious step, however, and should be carefully understood and considered.
Debt settlement involves using a third party to manage the debt situation. You may have tried to talk to the creditors but to no avail. Each month that the payment is late, there is a fee. Once the fees push the balance over the credit limit, there is another fee. Things can get out of control in an as little as a few months.
Debt settlement puts you in touch with an agency that specializes in helping individuals deal with serious debts. Debt settlement agencies will review your situation to see if you qualify. Debt settlements are mainly done for unsecured debt.
An unsecured debt is one that is not backed by any collateral. It is a greater risk for the creditor because they extend credit to you with nothing to fall back on except your promise to pay. Credit cards are the most common unsecured debts.
Debt settlements can still affect your credit in a negative way. Creditors may report that you are entering into a debt settlement plan and other notations that can turn away future creditors. If you use a third party debt settlement agency, make sure that you understand this fact.
If the debt settlement agency determines that your debt does not exceed the amount that you could reasonably pay then you will not be eligible for debt settlement. If in your case the amount of your debt does exceed what you could reasonably repay the agency will begin to work up a proposal based on what you can afford.
The debt settlement agent will look at the interest rates being charged by the credit card company. During a debt settlement, they may be able to talk the creditor into lowering the interest rate to a more manageable one. The same goes for late fees. If late fees are a problem, the creditor may waive them in the interest of recouping some of the debt owed to them.
Once you have enlisted the services of a debt settlement agent all of you dealings will be with that company and you will no longer deal directly with your creditors. You will pay a determined amount to the settlement agent each month and that amount will be distributed by him to your creditors according to the agreements reached.
Debt settlement involves using a third party to manage the debt situation. You may have tried to talk to the creditors but to no avail. Each month that the payment is late, there is a fee. Once the fees push the balance over the credit limit, there is another fee. Things can get out of control in an as little as a few months.
Debt settlement puts you in touch with an agency that specializes in helping individuals deal with serious debts. Debt settlement agencies will review your situation to see if you qualify. Debt settlements are mainly done for unsecured debt.
An unsecured debt is one that is not backed by any collateral. It is a greater risk for the creditor because they extend credit to you with nothing to fall back on except your promise to pay. Credit cards are the most common unsecured debts.
Debt settlements can still affect your credit in a negative way. Creditors may report that you are entering into a debt settlement plan and other notations that can turn away future creditors. If you use a third party debt settlement agency, make sure that you understand this fact.
If the debt settlement agency determines that your debt does not exceed the amount that you could reasonably pay then you will not be eligible for debt settlement. If in your case the amount of your debt does exceed what you could reasonably repay the agency will begin to work up a proposal based on what you can afford.
The debt settlement agent will look at the interest rates being charged by the credit card company. During a debt settlement, they may be able to talk the creditor into lowering the interest rate to a more manageable one. The same goes for late fees. If late fees are a problem, the creditor may waive them in the interest of recouping some of the debt owed to them.
Once you have enlisted the services of a debt settlement agent all of you dealings will be with that company and you will no longer deal directly with your creditors. You will pay a determined amount to the settlement agent each month and that amount will be distributed by him to your creditors according to the agreements reached.
About the Author:
Tire of struggling to keep up with your credit card debt? Learn some simple credit card tips on the Debtopedia website. Get a free copy of my report "Secrets Of Credit Card Debt" at http://www.debtopedia.com
posted by Credit Counseling at
12:35 AM
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