You have probably heard that talk is cheap, but when it comes to debt, talk can actually be invaluable. Quick wit and a silver tongue can’t get you out of debt, but taking the time out to speak honestly to your creditors one-on-one can help you get rid of part of what you owe.
Lowering your total debt by negotiating with your creditors is known as debt settlement. The goal of debt settlement is to have your creditors reduce your debt in exchange for a payment that will balance your account. In order to get a debt settlement you must decide upon certain financial goals with your creditors and finalize overdue debts that need to be satisfied.
Who Qualifies for Debt Settlement?
To qualify for debt settlement you must undoubtedly be in financial trouble. You must be in so much hot water that you can’t even consolidate your debt through a debt consolidation procedure. Admitting to yourself that you are in such a tough situation may be hard, but this is a reality you need to face if you want a debt settlement.
Most people who qualify for debt settlement have been very financially irresponsible in the past or have been the victim of an emergency that was so financially draining that paying off bills on time became impossible. The reason for this is that debt settlement is targeted at people who are incapable of meeting the minimum payments to their creditors.
Benefits of Negotiating Debt
The main benefits of debt negotiation are twofold:
- You can stop making payments to creditors
- You can get a lower payoff that usually amounts to half of your total debt
You can stop paying your creditors once you begin a debt negotiation program because monetary transactions are done through your chosen company. They receive a monthly payment from you and use that to pay your debt.
Your debt settlement company should also be able to lower your debt significantly. They do this by making a one-time payment to creditors that guarantees that they get their money. Credit card companies are willing to forgive your debt for less since the payment comes immediately as one lump sum.
Drawbacks of Debt Settlement
The primary con of debt settlement is that it puts your credit score at risk. You will notice that your score suffers a lot while you are in the debt settlement program. Fortunately, debt settlement companies know this and help protect their customers by requiring their creditor to acknowledge on the customer’s credit report that their account has been “paid in full” once the process is complete.
If you think you cannot possibly pay off your debt and need a way to reduce what you owe, please consider debt settlement. Speaking to a debt settlement company may be the most valuable talking you will ever do.
If you’re having trouble paying your credit card bills and other unsecured debt find out how debt settlement can help you avoid bankruptcy and become debt free faster.