Debt Settlement
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There is a way for people to get help who are largely in debt to creditors. The term is debt settlement. It allows for a variety of payment plans to help eventually pay off your debt.
The article, “What is Debt Settlement?” written by Janet Williams and posted on mortgage-listings.com, describes what exactly debt settlement is and the variety of ways it helps you pay off your debt.
“Debt Settlement programs give you a lot of options to clean your debts. It reduces your principal debt amount, eliminates your late fees, lowers your APR, and provides you the flexibility to repay your debts within your chosen time span.”
But how do debt settlement programs provide these services? They work closely with your creditors.
Debt settlement firms will negotiate with your creditors to reduce your principal debt amount. The most reduction you should expect is about 50 percent.
Your debt settlement firm may also be able to get your creditors to waive off late fee charges accrued from missing payments. This can ultimately result in saving hundreds of dollars.
“Some debt settlement programs are done to reduce the high APR's for a particular account. For example, some debt settlement company may notify that APR has been reduced to 8% for the proposals accepted after 10th September 2004 and reduced to 0% for all proposals accepted before 10th September 2004.”
For convenience, debt settlement firms have you pay off your debt through monthly installments. The firm’s fee is included in these monthly payments.
Debt settlement programs usually charge from eight percent up to 15 percent of the outstanding debt.
Your debt can be “settled” within a predetermined time frame. An average, the process will take three to nine months, but can be completed in one to three months or extended to over a couple of years.
Obviously, your monthly payments will determine on the length of time it takes to settle your debt. A shorter time frame will result in higher payments.
However, there are a couple of disadvantages to debt settlement:
“Your credit will be affected in a negative manner. This will be reflected on your credit report for the next 7-10 years.” And even though debt settlement firms claim to prevent creditors from haggling you for their money, this usually is not possible.
“There is a probability that creditors will continue to harass you throughout the process of negotiations and may even sue you or garnish your wage. However, only one creditor may garnish you at a time, and in some states, you may not be garnished at all.”
Debt settlement is a service provided to those who have acquired serious debt. It has many advantages, but like bankruptcy, it will affect your credit. But if you have thousands of dollars in debt, chances are that your credit is not very good to begin with.
