Did you know that about eight out of 10 Americans are in debt, in one form or another? As per a recent survey, the average American has about $38,000 in debt.
Paying down debt can quickly feel like an overwhelming task, mainly when you carry a household balance of $9000, like any other average American household. But worry not! If you want quick relief, it is best to consider debt settlement as a feasible solution.
However, there are pros and cons of debt settlement that you should explore before proceeding with this debt relief program. Here are a few essential aspects of debt settlement to help you understand its offerings better.
What is Debt Settlement?
Debt settlement involves negotiations with your lenders and creditors to reduce or erase your balance. If you feel burdened by debt, and facing difficulties in meeting your financial targets, debt settlement, unlike bankruptcy, is an option to consider. You could do it yourself. However, an excellent alternative is to seek help from a debt settlement company having expertise in handling such cases, more professionally.
The primary goal of debt settlement is to get creditors to fix a debt as paid in exchange for a partial payment.
How Debt Settlement Works
In the case of hiring a debt settlement firm, you have to deposit a certain amount of cash in a savings account each month. While you build your savings, the debt settlement company will suggest you make late payments to your creditors.
Once your savings account has a considerable balance for a lump-sum offer, the debt settlement company begins negotiating with your creditors to settle your debt. If they convince your creditors for a settlement, then the money in your savings account aids in the payoff.
How to Choose the Right Debt Settlement Firm
As an Entrepreneur heading a small business, it is best to hire proficient experts in debt settlements, with adequate skills and an excellent reputation.
First, evaluate the claims of achievements the debt settlement companies make and see if their fees are reasonable. It is good to review the company’s process and its terms to make sure you qualify.
Once you shortlist your choices, it is best to check out the other user experiences. It is advisable to check if the companies are members of the International Association of Professional Debt Arbitrators and the American Fair Credit Council.
Eligible Debts for Debt Settlement
Typically, the most insecure debts, like the unsecured credit cards and personal loans, payday loans, medical bills, and private education loans, qualify for debt settlements.
Debt settlement is not suitable for secured debts since they involve collateral, where the lenders can repossess the collateral you used for your loans, such as the home or automobile.
Benefits of Debt Settlement
There are both pros and cons of debt settlement; however, let’s focus on the benefits of this program.
You get to pay less, thus reducing your debts. Moreover, the program helps you pay off your mortgage faster, creating a positive long-term impact on your credit. Rest assured, you won’t get sued for your settled debt.
A debt settled account will remain on your credit file for seven years. Hence, understand your financial situation and hire a debt settlement expert, if you wish to go ahead with this debt relief program.