Settlement Can Create More Problems than It Solves

People with debts may want to reduce them by way of a debt settlement company. This may be an excellent choice for some people because they have, for example, large balances on credit card accounts that are accruing so much interest each year that they are not really reducing their balances. Debt settlement would benefit most of these people, but a debt settlement company that has its clients’ best interests in mind will suggest they not use their services. These prospective clients are:

1. Consumers with high credit scores
2. People with low balances left to pay
3. Those who cannot afford to complete the repayment plan that will be set up for them by the company

High Credit Scores

Those with high credit scores would see them decrease with a debt settlement. In order to make debt settlement work, consumers need to stop paying their creditors. Creditors are not likely to enter into negotiations if their clients are not having difficulties making their payments, so they will need to be behind by several months. When this happens, their creditors report these missed payments to the credit bureaus and their credit scores suffer.

Low Balances

As debt settlement can hurt people’s credit scores, those with very low balances may not want to risk lowering their scores for the small amount of money they would save with settlement. As the settlement negotiations are ongoing, consumers are not paying their bills because they are paying their debt settlement companies who are saving the money in an account on behalf of their clients. The creditors will continue to add interest and assess late fees to the balance, and if the balance is low, the interest and fees can dramatically increase it.

The Inability to Complete the Company’s Plan

If people sign up for the plan and realize later that they can no longer afford it, they will not be able to obtain a refund on the fees they paid to the debt settlement company. They will have damaged their credit in the process, and they will not be any closer to being out of debt.

A Debt Consolidation Loan

A solution for people who do not believe that debt settlement is the best option for them might be able to consolidate credit cards. When consumers consolidate credit cards, they receive a loan that will make it possible for their credit reports to show their accounts as “paid in full,” and this will help increase their credit scores.

 

Find Solutions for Debt Problem

Paying off your credit card balances is one way to get creditors off your back and restore your credit rating. Accumulating huge debt balances can create a world of financial problems. You might fall behind on your payments and get hit with several late fees. Even worse, your creditors might hike up your interest rates.

There are practical debt solutions and knowing your options is key to getting rid of your balances. You might consolidate credit cards into one bill by means of a home equity loan, balance transfer, or mortgage refinance. Taking advantage of this option requires good credit because consolidation often entails acquiring a new loan to payoff your multiple balances.

The inability to acquire a consolidation loan might cause discourage and feelings of hopelessness. Understand, however, credit card consolidation is only one method of solving debt problems. Other methods exist, such as credit card debt settlements.

Credit card debt settlement is the process of remedying or settling your balances for less than you owe on the account. The concept behind settlements is simple. You agree to pay your creditor a percentage of what you actually owe. Your creditor accepts this payoff amount and you no longer owe the company. Credit card companies lose money with settlements. Nonetheless, this agreement benefits both parties involved.

Without a settlement agreement in place, there’s a chance that you will never pay the debt. The creditor can send letters, threaten a lawsuit, and even file a judgement against you. However, these actions do not guarantee payment on your part. What’s more, you could file bankruptcy and have the balance dismissed. With a debt settlement, creditors have a chance of recovering some of the balance. In there eyes, some sort of payment is better than none.

Before approaching your creditor and asking for a settlement, it’s important that you comprehend the ramifications of this decision. Settlements can quickly alleviate your financial worries and give you a clean slate. The downside is that payment plans are rare with settlements and creditors typically request full payment within a few days of the agreement. If you’re not in a position to send a lump sum, debt settlement isn’t the best option for you.

You should also be concerned with how the creditor will report the settlement. Creditors report every action to the credit bureaus, including whether you paid an account as agreed. While creditors may accept your settlement and stop collection efforts, they’ll likely report this account as “settled” on your credit report. This remark draws attention to your financial problems. The fact that you had to settle an account impacts your credit reputation and might hinder future loan approvals.

Junk Debt Buyers & Debt Settlement

You may have junk debt. These are debts that the original creditor, for a variety of reasons, has been unable to collect. There are many steps that creditors take as they attempt to collect debt. Credit card companies will first call their late paying customers in house. They’ll then attempt to collect any late payments immediately, and will continue to try to turn delinquent customers into current payers. This process can take months, but eventually, if the lenders are unsuccessful in their attempts, they will turn the past due debt over to a collection agency. Some credit card companies actually own the collection agencies they first employ to collect past debt. Eventually, if money has not been collected, credit card companies will sell the debt to junk debt buyers.

Junk debt buyers pay for debt according to its age. Fresh debt will be worth more money, while very old debt will sell for less. Even debt beyond the legal statute of limitations is salable, since some consumers will not understand their legal rights, and will actually make payments on technically expired debt if faced with aggressive collection techniques.

Since junk debt buyers many times purchase debts for pennies on the dollar, they are likely to offer huge discounts to debtors. Relatively newer debt can many times be paid off for 40 cents on the dollar and old, almost worthless debt can be settled for much less.

Consumers need the help of a qualified debt relief agency in order to understand the type of debt they owe along with the options for settlement. While many consumers first go to a non-profit debt counseling firm to obtain a “debt management plan,” over 70 percent of these arrangements eventually fail because the monthly payments become prohibitive, even though a plan to consolidate credit cards may have been introduced. Although the upfront costs of non-profit agencies may be enticing, the end results can turn out badly.

Junk debt buyers are aggressive collectors who could care less about the plight of the debtor. Since their companies own thousands of dollars of purchased debt, these collectors are interested in quick money only. They many times violate the rules of the Fair Credit Collection Practices Act, while they make the lives of debtors miserable with constant harassment through letters, emails and phone calls.

Consider the use of a quality debt settlement firm for assistance with consumer debt problems. If junk debt is the problem, consult an expert in the collection of this type of debt.

Things to Do to Make Debt Negotiations Work

When consumers’ credit card payments are overwhelming, they can opt to consolidate credit card debt by obtaining a debt consolidation loan. This loan makes it possible for them to pay all of their credit card debts at once, and their credit reports will show these debts as “paid in full.” As they repay their new consolidation loans on time each month, they are adding positive credit history to their reports, and this raises their scores. If they would like to try negotiating with their debt collectors before they consolidate credit card debt, they are allowed to do this, but they will want to follow a few guidelines.

Offer Less than They Can Afford

The first thing they will need to do is offer to pay the credit issuer an amount that is lower than what they can actually afford. For example, if consumers can afford $400 each month, they will want to say that all they can afford is $200. It will be better for the consumers if they can convince their debt collectors that they are receiving the most money possible from them.

Learn the Fair Debt Collections Practices Act (FDCPA) By Heart

The FDCPA will tell consumers everything that debt collectors can and cannot do in the process of collecting a debt. In the event that these debt collectors break any of the guidelines outlined in the FDCPA, the knowledgeable debtor will be able to gain the upper hand by informing these debt collectors that they are breaking the rules. When consumers can do this, they reduce a debt collector’s ability to take advantage of them.

Document a Current Financial Hardship

By writing a letter that clearly documents the problems they are having paying their debts, consumers can demonstrate to their creditors that they are truly paying the most they can possibly afford. Because the hardship is beyond their control if it is due to the loss of a job, for example, consumers are informing their creditors that they cannot pay more of their debts and why.

Take Advantage of Time

At the end of the month, negotiating with debt collectors can be easier for those who need to obtain a favorable agreement. Sometimes, debt collectors have quotas to meet, and this will make it more likely that they will give those in debt a good deal so that they can receive the last agreement they need. Another time to take advantage of is when the current collections agency is in the process of moving the debt to another agency.

Getting Out of Debt Made Easy

The last few years have not be kind to businesses small or large and if you find that your own business is teetering on the brink of bankruptcy, then it is time to take action. The truth of the matter is that there are many businesses that fold before it is strictly necessary. While it is true that bankruptcy is a choice you can make, there are many different options open even when you are feeling threatened. Take the time to figure out how you can save your business before opening up bankruptcy proceedings.

First, remember to take advantage of the different debt restructuring firms in your area. These firms are designed to help you prevent bankruptcy, and as they reorganize your business, they will make it more fit to withstand troubled times. Before you chose a debt restructuring firm, however, be sure to check their background thoroughly.

On a simpler note, take the time to consolidate the credit cards that your company uses. Credit cards get issued at different times, and they have different rates and different policies. Not only will this put all of your credit card debt in one place, you will also find that it forces you to stay more organized on top if it. To consolidate credit cards, speak to a third party agency that can help you renegotiate.

Reduce operating costs by figuring out where your dead weight is. If you are making payments on utilities and space that you don’t use often, cut it out. There is money leaving your company, and while a fair amount of that is necessary, typically not all of it needs to leave. While it may feel like pinching pennies, the truth of the matter is that it can make a big difference later on down the line.

Take the time to talk to a financial adviser. There are advisers that work with both individuals and companies and they can help you get your debt in order. Go into the meeting with the statement that you want to avoid bankruptcy and then you can work together towards achieving your goal. Interview several advisers before you settle on the one that seems most fit to get your company back where it needs to be.

There are definitely alternatives to filing for bankruptcy, so consider where you are going and what you are going to do with your business.

Advantages of Debt Consolidation Loans

In these tough economic times, more and more consumers are having problems paying off their debts. When it becomes hard to service one’s debt, it often seems like the only way out is to file for bankruptcy. There are other options open to most consumers, and one of the best is debt consolidation or debt settlement. Not everyone is a good candidate for consolidation, however, and many of the best candidates never look at settlement seriously because of mistrust or false ideas about what the debt settlement industry does.

What makes a consumer a good candidate for debt consolidation? The ideal candidate will meet several criteria, but many consumers can consolidate credit card debt even if they only meet a few of them.

First and foremost, an ideal client will either be delinquent on his or her debt payments or already in default. He or she may also be about to fall behind. It is much easier to negotiate a settlement if the client has already been having difficulty paying his or her bills.

The second criterion used to judge candidates is some form financial hardship that makes it unlikely or impossible for the consumer to continue making payments on his or her debts. This hardship can take many forms; it might be a job loss, a divorce, medical bills or a reduction in income. A low income can also make a consumer a good candidate based on financial hardship.

The last criterion that makes an ideal debt consolidation candidate is a high debt burden. It is easier to negotiate a settlement for clients who are deeply in debt, as opposed to those who owe smaller amounts. Likewise, it only makes sense to consolidate larger debts, as creditors are not as likely to negotiate a settlement for small debts and, when they do, clients are not likely to save a lot of money. In fact, these should be paid in full, as the costs of settlement outweigh any potential benefits.

Debt settlement is a great way for consumers to consolidate credit card debt and avoid bankruptcy. The settlement process must make sense to every party involved. For that reason, candidates will not be accepted if it appears unlikely that a settlement will be reached. Furthermore, because individual circumstances vary, no guarantee can be given that any candidate, even an ideal candidate, will successfully reach a settlement with his or her creditors.

Debt Negotiation – Can You Do It Yourself?

Most people do not realize that debt negotiation can be done on your own, just like other activities such as taxes or setting up your own retirement accounts. If you feel like you need to consolidate credit cards to get your debt under control, you can negotiate with the various debtors yourself. If you find yourself in a situation where you have the money to pay off a credit card settlement that you’ve negotiated yourself, then you may save money doing it yourself, because while we might get a smaller settlement, our fees could end up costing you.

Sometimes, though, a professional can get better results. If you do not have a large sum of money to pay off a settlement, debt negotiation professionals are probably the way to go to consolidate credit cards. Professionals have the knowlegde and skills to assess whether the different creditors are giving you a fair deal. Why settle for small discount  to a debt when we can probably get you less that the full balance. Also, some creditors are not as willing to deal as others. Professional debt negotiation companies know which debtors offer good settlements, and which don’t.

Another very annoying part of debt negotiation is handling endless calls from creditors. Professionals can make sure you understand the FDCPA, or Fair Debt Collections Practices Act, to make sure you receive as few as possible calls. The company you choose can even take all the calls for you in certain cases, so you do not have to deal with creditors at all. When it comes to dealing with your finances, the less you have to deal with the better; using professionals can free up time to try to come up with more ways to make money to pay off your debts in a timely fashion.

In this bad economy, more and more people are looking to consolidate debt to get out from under their debt. This process is possible by yourself, but the results are often a lot better with the help of able debt reduction professionals. Just like doing your own taxes, you will almost always get a better refund if you use people who know what they are doing. It’s always best to explore all your options so that you end up saving as much money as possible in the long run. Debt can be very stressful, and having an opportunity for a bright financial future is the job of debt reduction specialists.