If you are so far in debt that you regularly miss payments, have bill collectors calling your home or place of business, and feel like there is no way out, you could benefit from the services of a debt settlement company.
A debt settlement company will try to reduce your credit card balances—and possibly other loans—into a smaller balance.
The company may even set up automatic payment options, in which the money is taken out of your bank account automatically each month, decreasing the odds that you will have a late payment or else your settlement with the creditors may become invalid. When you pay the debt settlement company, the company distributes the money to your creditors on your behalf. You have only one bill to pay each month and one balance to think about.
But that’s not the end of the services a debt settlement company can provide. A good doctor will do more than simply write a prescription to cure your illness. A debt relief company should do more than just accept your payments and write checks to your creditors. The company works with you to create a Debt Settlement Plan designed to pay off your debts, usually within three to six years.
The company can negotiate with your lenders for lower interest rates and waived fees. Representatives can also negotiate to lower the overall balance owed. If the debt settlement company does negotiate a partial payment, this action will be reported to the credit agencies, and could reflect poorly to future lenders. However, less debt also means you are more likely to be able to pay off your bills without going into bankruptcy, so weigh the pros and cons of this decision carefully.
A debt settlement company should also guide you on your journey to living debt free and re-building your credit so you don’t repeat your mistakes and go down the same road. They may recommend that you visit with a credit counselor that can help you write a budget and help you find ways to cut your living expenses, freeing up more cash to pay off your debts more quickly.
Credit counselors can help teach you how to analyze your credit report and dispute any inaccuracies or wrongful statements. The firm may also help you write a “consumer statement” that will appear on your credit report explaining any negative items to potential lenders.
Cost of Debt Settlement
Debt Settlement is not free, but due to a recent FTC law passed to protect consumers, debt settlement companies are NOT ALLLOWED to charge any fees until they are successfully able to settle with your debtors. The companies typically charge a small monthly fee of somewhere between $25-$70 for administration of your account.