Have your struggles with debt become too much for you to deal with? Are you no more capable of making your monthly financial obligation repayments? If that is the case, you would probably need the services of a debt settlement company.
Financial problems are a reality
It is not a secret that nowadays there are many people who are having trouble with debt. It is even safe to say that many people are really struggling with multiple financial obligations. And so when people are facing such problems, they naturally try to find a solution to these problems. And while for many people, the number of different financial tools and methods for dealing with multiple debts leads to the desired effect and these people are able to get pay off all the money that they owe and are ultimately able to live a life free of such financial obligations. There are those, who despite all their efforts, cannot manage to succeed in getting out of their debt, and are often left exhausted and hopeless.
Are there any options left for those who can no longer make their debt repayments?
If you have already tried over and over again to get rid of your debts and you still have not really had any significant progress, your best option may actually be to seek a debt settlement.
What is a debt settlement?
You may think that debt settlement is quite similar to debt negotiation and debt consolidation, however, it has some major differences. With a debt settlement, your goal is to actually reduce the amount of debt that you owe to your creditors. With debt consolidation, you are not really able to reduce the principals on your loans. You are basically just getting a single monthly payment instead of multiple payments and you are also possibly lowering the interest rate on your financial obligations. However, by consolidating your debts, you are not actually reducing the overall amount of debt that you owe. By using a debt negotiation, a debt negotiation company negotiates with your creditors on your behalf with the purpose to lower the interest rate on your loans as well as to reduce your monthly payments, but the actual debt amount that you owe normally stays the same.
How does debt settlement work?
Debt settlement basically works similar to debt negotiation. However, the final goals of a debt settlement are a bit different. The main purpose of the service, and therefore, the company that you are getting that service from is to negotiate with your creditors on your behalf and reduce the amount of money that you owe to all your creditors. When you sign up for this service, you normally start to add funds to an account set up specifically by the debt settlement company that you are working with. Once the money in that account reaches a certain amount, the company will contact your creditors to convince them to accept an amount lower than the one that you actually owe. After the creditor has accepted the new amount and the sum has been paid, you will no longer be indebted to that creditor. The length of the process depends mainly on how fast you would be able to save enough money so that your debt settlement company can start the negotiation process with your creditors. Most companies that offer this service normally allow their customers between 2 to 4 years for the whole process.
When should you consider debt settlement?
- Probably the first thing that needs to be clear here is that your debts would all need to be of a specific type. Debt settlement is normally a viable option only for people with unsecured debt. Unsecured debt can be anything from medical bills, credit card balances, payday loans and other types of debt that do not involve any collateral whatsoever. For example, if you want to use debt settlement for your vehicle loan or your mortgage, you would not be able to do so. Simply because both of these loan types are backed with collateral. In case you have such secured debts and you are not able to repay them, your creditor will most likely repossess your property and sell it to get the money that you owe. Keep in mind that even though student loans are considered as unsecured debt, they are often not eligible for debt settlement.
- The second most important thing that determines whether debt settlement is a viable option for you or not. You need to be experiencing legitimate financial trouble that simply does not allow you to make your debt repayments. Such reasons commonly include losing your job, the death of a spouse or an extreme overspending. These are just some examples that can make your debt repayment a lot harder. Ultimately, in order to qualify for a debt settlement, you need to have almost zero chances of repaying your financial obligations all on your own. If that is not the case, your debt settlement application will most likely be turned down.
How to choose the best debt settlement company for your specific financial situation
You need to understand that the best debt settlement company is not always the one that offers the best average debt reduction. Of course, you should consider all the information that you can get, but ultimately it comes down to more than a single factor. The bottom line is that you need to find a company that is best suited to meet your specific needs. Here are some factors you should take into consideration:
Longevity and reputation
If a certain debt settlement company has been in the business for a long time and has managed to sustain a good reputation, there is probably a good reason for that. That means that there are fewer chances for such company to be engaged in shady business practices.
This one is pretty obvious. All the best companies in the business should be accredited by organizations like (BBB) – Better Business Bureau, an organization like the International Association of Professional Debt Arbitrators, shortly referred to as (IAPDA) or the (AFCC) – American Fair Credit Council.
Companies that have lower fees
Normally, the best companies out there are keeping their fees low, in relation to the competition
Companies who work with customers that have a variety of debts
Almost every financial obligation settlement company in the business would be willing to settle medical bills and credit card debts. However, the best companies would be also willing to try and settle other types of debt such as business debt and some student loan debts. There are companies that may even try to settle certain specific types of secured debt.
Companies that offer reasonable timeline
A standard financial obligation settlement timeline is from 2 to 4 years. If you have the needed resources, the best loan settlement companies can settle your financial obligations much faster.