Opting for debt settlement can be quite complex depending upon your particular situation. Apart from the more important issues that need consideration, you might encounter quite a few minor issues that will require careful evaluation, especially if this is your first time with debt settlement.
Take Proactive Action
The best time to enroll for a debt settlement is when you are actually on time with all your monthly debt servicing payments but anticipate that the situation may not last. It may be worth the while to consider deferring your repayments because it avoids your credit being adversely impacted when you travel the debt settlement route.
An arrangement whereby a creditor allows you to miss a debt payment without facing any consequences is termed as a deferment. It is not uncommon for banks, mortgage companies and auto finance companies to agree to a deferment for a month or so if the creditor is facing a temporary financial crisis. Student loans can however be deferred for longer periods. As the financier has agreed to the customer’s request regarding delay in payment, missing out the payment does not leave any negative impact on the customer’s credit history. However, the account balance increases due to the monthly interest charged since the payment was deferred.
Don’t Pay More Than Necessary
When selecting a debt settlement service provider, be sure that you do a proper market analysis as there is quite a large difference between the amounts charged by one company and the other. There is a general tendency of these companies to charge you a fee of around 20% of the amount that you owe as debts. However if you are smart you can choose a company that will charge you only a percent fee on what they can save for you; this can be as low as 10-15%. If you have clocked up a debt of $30,000 and if the debt settlement is done at 50%, then the first type of company would have charged you $6,000 while, you can walk away paying just $2,250 with a company that charges 15% on your savings. Even if the debt settlement takes place at just 30%, you would stand to gain $2,850 or more than 47%! You can access a large number of debt settlement reviews online that will let you choose the best debt settlement company.
Enroll Spouse or Partner As Well
If you are married or have a partner, it is advisable that both of you participate in the debt settlement program. Among the issues that you need to reckon with are stuff like how much debt is in both names, whether both of you are individually authorized to operate the relevant accounts, how much debt is just in your name and how much in your partner’s name, etc. If the outstanding debt is tilted towards you, it may make sense for only you to enroll in the debt settlement program leaving your partner free with the usual line of credit. In case you need to raise debt money, one of you will be free to get it with a good credit score.There is little point in negatively impacting both credit histories.
Beware Of Debt Settlement Program Length
The period of the debt settlement is crucial as the longer it is scheduled, the more the chances of you being able to complete it successfully. Debt settlement programs work best if you have assets that can be sold off immediately to settle the outstanding debt.
Author bio: Michael Brett in a customer counselor employed with one of the leading debt settlement companies. An amateur boxer, he has also written a number of personal finance articles in the online space.