Posted on June - 24 - 2011
Save thousands of dollars with a debt settlement
Working out a debt settlement could help you save thousands of dollars in the long run. Not all creditors are willing to settle debt however, so it’s important to understand how the process works.
Debt settlement vs. debt consolidation
Debt settlement is not the same as debt consolidation. Getting a loan to combine several credit card debts into one payment is debt consolidation. Usually the goal of consolidating debt is to lower the overall monthly payment and lower the amount of interest being paid. Debt consolidation services sometimes offer counseling to help get your finances back on track. But be cautious about signing up for debt consolidation services because there are a lot of shady companies looking to profit from desperate consumers.
With a debt settlement, your creditor would agree to accept a smaller payoff amount in exchange for wiping out a debt. Depending upon the deal struck, you could end up settling for half of what is owed or even less.
Do-it-yourself debt settlement
While there is certainly no shortage of companies out there offering to negotiate a debt settlement for you, it is best to deal directly with creditors yourself. That’s because some debt settlement programs will tell you to stop making any payments on credit card debt and other bills. During that time you are encouraged to save up enough money with the firm to make a settlement offer later. But some unscrupulous debt settlement services never send any money to creditors.
Dos and don’ts of debt settlement
If you choose to pursue a debt settlement, do not work with any company that requires you to pay fees before receiving any services. Avoid working with agencies that make promises that sound too good to be true or even guarantee that they can reach a debt settlement. Finally, make sure you get all the terms and conditions in a written contract before agreeing to work with anyone. You want to have a successful settlement that ultimately allows you to save money, not end up in worse financial shape than before.
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