What is debt settlement? The Debt Settlement Strategy has been around since man first began lending. The earliest instances in the United States of this strategy seem to be attributed to William Samuel Johnson. Johnson was one of the most educated signers of the United States Constitution.
Working as a creditors' attorney, Johnson often used the debt settlement strategy to negotiate a settlement of accounts rather than engaging in lengthy litigation (which is what debt settlement is all about.)
The debt settlement strategy involves a debt reduction of the actual BALANCE that you owe, rather than the just the interest rates. Debt settlement companies that are legit will be able to negotiate a settlement of 30 to 50 percent of the balance owed.
It is intended to provide those who are unable to make their minimum payments an ethical way of repaying as much of their debt as they can, whatever fits within their means.
When you hire a debt settlement company to advocate on your behalf, they notify your creditors that you have enrolled into their program and that your intention is to settle your accounts. They also notify that, since they represent you, all communications should flow throughthe debt settlement company's office.
Your monthly payments are combined into one monthly payment, of which you deposit into a settlement account. I recommend you do business that will allow you to save your funds in your own account as opposed to an escrow account, that way you have complete control of the account your funds are held in.
As you deposit your funds, your money continues to accrue until you have an amount that is sufficient to settle with a creditor.
For example, if you owe $1,000 on a credit card, a debt negotiation company can arrange for you to pay off the debt for a lesser amount. $400 would be a good example of a settlement that could be reached. Once $400 has accrued into your settlement account, the settlement can be finalized and you pay the creditor the agreed amount. That debt is now paid and the process is repeated until allcreditors have been paid.
The debt settlement strategy is designed to get you out of debt as quickly as possible, usually within 18 - 36 months.
To qualify, one must be behind or their payments (or anticipate they soon will be). Creditors will not negotiate if you are current because there is no incentive for them to do so.
This delinquent status can have negative impact on your credit report. Your creditor will report you as being late. However, if you're already late, the impact to your credit has already occurred.
Debt settlement is nothing more than a negotiated compromise with your creditors; it's actually a win-win situation for you and the creditor. The result is a fast track to debt relief.
It's also much more flexible than other programs, because it's the only approach that allows for adjustments up or down in the monthly funding commitment, which is important for consumers with unstable finances.
In conclusion, this strategy only works on unsecured debt. But, debt settlement is an ethical, moral way to eliminate debt if you truly cannot afford your monthly payments due to hardship. It is one of the most straightforward and highly effective solutions for retiring debts and avoiding bankruptcy.
I HIGHLY RECOMMEND DEBT SETTLEMENT AS YOUR A DEBT ELIMINATION PLAN if you cannot afford your payments; it will get the job done quickly and, though there is pain in the short term, you can see the light at the end of the tunnel!
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