Debt Help

Debt settlement is a process, wherein the debtor and the creditor come to a mutual understanding, in which the debtor pays a part of the total sum of money, which he owes as debt, in a single payment. Debt settlement has quickly become one of the most popular means of getting rid of the debt, but the process has its own benefits and drawbacks. In order to see the various debt settlement pros and cons you will have to get a brief idea about what debt settlement programs actually involve.

Debt settlement programs are crafted to help the debtor as well as the creditor. Normally, the creditor agrees to the concept of settlement, only when he is told that the debtor will not be able to pay back the whole debt, and allowing him to avail the debt settlement facility will make sure that he will at least get a part of his money back. On the other hand, the debtor is grateful that, finally, he has gotten rid of all the debt. These programs are much better for the debtor, because he can escape the debt by paying far less than what he actually owes to the creditor, thus getting the debt help he needs.

Like any other debt reduction strategy, debt settlement too has its own pros and cons. And it’s smart to asses these debt settlement pros and cons before opting for the settlement process. In fact, this will also make it easier for the individual to make a choice of whether he should go with debt settlement or choose some other programs.

Let’s consider some of the debt settlement pros. In debt settlement, the debtor pays the creditor much less than what is actually owed. Depending on the creditor and the debt settlement companies negotiation the debtor can save around 40 to 60 percent of the money that he owes. If compared with bankruptcy, debt settlement is a much better option to get rid of the debt. At times, declaring bankruptcy can be full of hassles. If the negotiation part is well handled, the debtor has good chances of eliminating the interest amount as well. Even the penalties incurred owing to delays or omissions can be considered for a skip when negotiating.

When one compares debt settlement pros and cons, the pros seem to be far more lucrative than the cons, and this is what makes debt settlement one of the best means of getting rid of all your debts.

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Ok, so you have $30,000.00 worth of charge card debt. You’ve heard of debt settlement services that say that they can lower not only your APRs but they can reduce your outstanding balance on the charge cards. Wow, is this for real they will be able to reduce your balance, really? Well yes and no.

Debt settlement programs are a great thing for a select few types of consumers. Yes your balance can be paid off at a settled amount but the actual balance on the charge cards is never actually lowered. What really happens when you enroll in a debt settlement program is, you go very late and when the settlement institution feels that the bank is desperate enough then they offer a settlement. It is something you can do on your own with a savings account.

How this works: if you don’t pay your credit card bills, all the creditor can do is sue you and even if they win that doesn’t mean that you will pay them back. Because of this, credit card companies will accept a settlement for a debt that they feel will not be repaid to try to recoop at least some of the losses. This DOES affect your credit standing in a negative way and if there is a company that is telling you different they are lying.

Why debt settlement [spin]processes affect your credit in a negative way: Well, what happens is, the debt settlement institution will calculate all of your debt, lets say that you have $30,000.00 in credit card debt. They will take this number and multiply it by the normal settled amount for that state, for this example I am going to use 50%. They tell you that you will be able to pay off the balance with a total of $15,000.00 and they explain to you that you won’t be paying any interest in the process. Well, this is the case, you will not be PAYING interest but it will be accumulating on your account along with late fees and other charges. They then explain to you that your monthly payment will be $497 for 36 months which is a lot less than you are used to paying and it excites you. However, hidden in that $497 per month there is a monthly fee of $81.00 which after the 36 months builds to a total of $2916.00. Once you agree to the terms, the settlement company sets up payments directly to them and does not pay the banks instead, they put this money into a savings account and when you accumulate enough funds they then offer the settlement payment to the creditors. This is something you can do on your own. Please however, do not do this if you have good credit because it will put a huge scar on your credit report!

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