The Basics of Debt Settlement

The Basics of Debt Settlement

The Basics of Debt Settlement

Debt settlement can save you thousands of dollars, but can also be a complicated process if you are working alone. A professional team can really simplify the process of reducing your debt, and will only charge you for services after the settlement are complete. You should know the basics of this service before committing to it as a financial plan, however, since it may not be right for your personal financial situation.

What Debt Settlement Is

Debt settlement does not erase your debt, and may not work if your lender doesn't agree to the negotiations. Most lenders are willing to work with you to forgive a portion of the debt in exchange for payment. Most lenders require a lump sum payment of the remaining balance at the time of the settlement so you should be prepared to pay the remaining balance of the debt shortly after making an agreement with the lender.

Debt settlement can also only be applied to certain types of loans. For instance, mortgages and student loans aren't usually included in debt settlement services. Credit card debt, however, can be negotiated successfully. You can often save 50% or more on the debt that you have accumulated when companies are willing to work with you to accept a reduced amount.

The Process

Debt settlement begins by contacting the company that holds your loan, such as a credit card company. Most of these lenders are willing to work with customers who need settlement to avoid losing all of their money in a bankruptcy, although not all lenders are willing to work with you to reduce the debt amount. Having a professional team of debt specialists will increase your chances of seeing a reduced loan amount through settlement.

There are some advantages that the lender cannot ignore when given the option to choose a lump sum payment through debt settlement. For example, statistics show that lender can often recoup more money when they use settlement negotiations than with other methods of collection. These advantages are what make companies more willing to work with you to negotiate the terms of your debt. If you do find that the company is willing to work with you the savings you see can be immense.

Debt Reduction

Debt settlement works to reduce the amount of debt that you owe, which can also have a positive impact on your finances. As you continue to pay off your debts to become debt free you are able to pursue other financial plans. Debt can literally drag you down causing you to be unable to buy a home or make other financial plans. With a settlement you can pay a reduced amount and improve you credit rating over time.

In some cases, debt settlement can also damage your credit score. If you have any questions about your debt settlement you should contact your advisor for more information. This procedure can have many affects on your credit score making it important to be informed.

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