Debt Settlement Strategies

Debt Settlement Strategies form the most important and integral part of your financial plan to secure a safe future. There are different strategies you can use for your debt settlements with your creditors. Have a look…

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Debt Settlement
Debt settlement is a process of settling your debts with the creditors. You can negotiate with your creditors to come up with a reduced debt, which you can afford to pay. The reduction is usually about 30-60% of the total original debt amount.

When government announces a lower rate of interest, you can approach the credit agency to lower the rate of interest. This way you can pay at lower rates. This is because, the interest rates normally increase, and when this happens the lenders will increase your tenure and ensure that you pay more. But they will not give rebate when the rates go down. Its therefore becomes necessary that for your financial interests, you keep track of the interest rates.

Debt Settlement Strategies
Once you have incurred in debts, you have to plan how to repay the amount to your creditors. One of the best methods is debt consolidation. There are several debt consolidation firms available, but you have to choose the most reliable one. It is definitely not possible to eliminate all your debts in an overnight. If they assure you of that, you are at a wrong place, wasting your time or rather getting trapped. They may just quote an amount over the phone without even a meeting with you. Their fees may be very high. Don’t get trapped in their flattery words, they just want to make money, and you are victimized as a money making machine.

On deciding the consolidation company, it is necessary to work out together on all financial matters. Start with clubbing all debts into one, slashing the higher interest rates. Now you can pay lower monthly installments. These companies are now the mediators between you and the creditors. They also convince the creditors to reduce the interest rates.

If you are in a very bad financial state, like you are not in a position to pay the minimum required payment per month, debt consolidation may not be the right option. In any case you’ll not be eligible for the program. It is important to keep up your morale. You can still get out of this miserable condition through debt settlement programs.

The debt settlement programs offer many options to clear your debts. It reduces the principal amount, eliminates the late fees, lowers your APR, and provides you the flexibility to repay the debts within your chosen time period. The advantages of this program are,
1. You don’t have to starve for paying the minimum monthly payment
2. You get time to save money and change your life style.

Being careful in chalking out your Debt Settlement Strategies will help you to lead a good life and clear your debts. Saving money for those things you want to buy will also help, as you don’t have to borrow from someone. This will come handy only when you are patient. When you have collected a lump some amount of cash, try to reduce your debt burden immediately.

Shopping can be fun with credit cards. But little do the people know about the devil in disguise. Credit cards sure are very useful, but they can easily kill all your fun. They kill you with their bills.

It is critical to hold any amount of unsecured credit card debt, and must be taken care of. It is the responsibility of everyone to find plans to minimize unsecured debt and stick to them.

Unsecured Credit Card Debts
The credit card loans do not have a fixed amount attached to the pay back. The interest rates keep building and if there is no proper plan of action, the amount it will take to pay the loan will be triple or more than the original balance. If numbers, due dates, interest rates and minimum payments are confusing, financial plan is very much the need of the hour.

To avoid such conditions, it is advisable to have only one credit card, which must be used wisely and only during emergency. If you however have hit the pit, start saving money from avoiding unnecessary expenditure. Try to save money from every opportunity. For example, packing lunch from home can save nearly a thousand dollars each year. Let’s say at office you pay $10 for lunch each day. On average, you work for 22 days a month. And this accounts for $220 each month. By packing lunch from home, you save $2640 a year.

To sum it up, here is debt settlement advice
1. Be honest but represent your financial position to be unfavorable.
2. Try to avoid other debts
3. Do not disclose your workplace or your bank
4. If not sure of being in good stand in comparison to the crediting agency, do not hire a lawyer.
5. If you have contracted more than one creditor, for the same loan, be sure that your account is sold off to a second creditor. By this you can avoid the first creditor.
6. In all probabilities, once you have settled the debt, you may have to pay income tax. Your creditor will send you the related documents at the end of the financial year.

Ultimately, be wise and avoiding the debt trap is the key. Manage your finances properly. If you owe nothing, you are the smartest person alive. Make a budget each month and make sure that you and your family follow it. Don’t buy things which are not needed, for example a costlier mobile phone than your friend or the latest ipod just because your friend shows it off in style. Lastly, use credit card wisely. Carrying cash will help you stay in control.

These are only a few ways to save money. Make several such savings and you can find that several dollars are being put in to get you out of the debts. Your first priority is to settle all your debts. It is very satisfying to be debt free, and moreover you will have acquired self-control and persistence.

By Jayashree Pakhare

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Shocking Facts - What Debt Settlement Companies Don’t Tell You
by: Denise Hal

If you’re thinking about using a debt consolidation or debt settlement service to help you get out of debt faster and save money on your monthly payments, make sure you do your homework before choosing a company. There are definitely shams and scams out there.

First let me say that debt consolidation is *not* the same as debt settlement/negotiation, which most people don’t realize.

Debt settlement companies charge hundreds of dollars as an initial "admin fee" to set up your account, plus a monthly service fee. The fees vary depending on the company and the amount of your debts.

Such companies take your money every month, but don’t make monthly payments to your creditors! Instead, they put it in a trust account, negotiate your debts with your creditors, then make a lump-sum payment when there’s enough in your account to pay a creditor in full.

That can take *years* depending on the amount of debt you have with each creditor. Meanwhile, you can be sued by your creditors and your wages can be garnished! (Or just don’t make payments to your creditors. You’ll end up in the same spot without paying someone to help you get there!)

Settlement companies don’t ask your creditors to stop all interest, late fees and overlimit fees from accruing. That means while the negotiations are ongoing, your bills will continue to grow! So if you’re sued and a judgement is brought against you, you’ll owe more money than before!

And shoddy companies, which there are alot of, don’t tell you *any* of this up front. I call it "getting permission by ommission" because they simply don’t tell you how their program works *before* you sign an agreement with them. Or after, for that matter. But if you ask the right questions, eventually you’ll figure it out. (Or when the crap hits the fan. Whichever comes first.)

Let me give you an example of how debt settlement works.

Let’s say you have $20,000 in unsecured credit card debt. You owe $10,000 to one credit card company, $6,000 to another and $4,000 to a third. You agree to a 5 year plan where you pay $250 a month to the settlement company. (After all, $250 a month for 60 months is only $15,000, so you’re saving $5,000 and you’ll be debt-free in 5 years, right?)

The admin fee will cost you $750. Your first 3 monthly payments go towards that and nothing gets put into your trust account until your 4th month.

The settlement company keeps $50 of your $250 payment each month for the service fee. That means $200 a month is being added to your trust account.

Most debt settlement companies claim to be able to negotiate your debt for about 50% of what you owe. So let’s use the lowest credit card debt as an example.

If you owe $4,000 and your creditor agrees to accept $2,000 as payment in full, it will take 10 months at $200 per month to have enough in your trust account to pay off just that one credit card.

But remember, your first 3 payments to the settlement company only paid the admin fee. That means your first credit card settlement is 14 months *after* you started sending them money.

So what’s the problem? It’s simple. Your creditor won’t agree to accept half of your actual debt unless, or until, it can be paid in full. Otherwise, you’re expected to make your normal monthly payments.

Since you don’t have $2,000 in your trust account, and you won’t have it until more than a year after you stopped paying your creditor directly, they’ll probably take you to court and request that your wages be garnished long before you have that $2,000 built up.

And what about your other creditors? Well, they’ll be waiting even longer to get their money from the settlement company. The $6,000 debt will take 15 *more* months to pay off, assuming your creditor waits that long and agrees to 50%. And that $10,000 bill? You do the math.

On the other hand, if you signed up for a 3 year plan with the settlement company, your debts would be paid off sooner. But, the question is, will your creditors wait that long? Probably not.

The facts are, you can negotiate with your creditors yourself. Most will agree to take a smaller monthly payment from you and stop all interest and fees from accruing. And, of course, you’ll save thousands of dollars in fees to a settlement company.

Before signing up for any service, please be sure you check out the company thoroughly. And don’t let the words "non-profit" fool you either. Alot of debt settlement companies claim to be non-profit.

Going back to the example above, if you pay them $15,000 over a 5 year time frame and they settle your debts at half of what you owed, they’ll make $5,000 from you. I’d call that a profit, especially since they might not have actually helped you in any way.

Most companies will allow you to cancel your account and get a refund of what you’ve paid, less the non-refundable admin fee and the monthly service fees. If you feel you’ve been mislead about their program, don’t hesitate to argue til the cows come home. File a complaint with the Better Business Bureau or hire an attorney if you feel you’re getting nowhere.

You can visit the Better Business Bureau’s website (http://www.bbb.org) and find reports on hundreds of companies. Here’s a small listing of companies that have poor reputations with the BBB:

National Consumer Debt Council LLC - Irvine, CA (A.K.A. NCDC, United Consumer Law Group)

Financial Rescue Services - Burbank, CA

Debt Legal Services - Anaheim, CA

American Debt Relief - Los Angeles, CA (A.K.A. A M Debt, American Debts Relief, Debt Relief)

Please be very cautious when choosing a debt help company and ask lots of questions before agreeing to anything. If you find they’re evading your questions, run fast and run far. There are reputable companies out there, so keep looking until you find one.

About The Author: Denise Hall is the owner of Home Business on a Budget which specializes in tools and resources for your home business needs. Visit http://www.home-business-on-a-budget.com today. Subscribe to Home Business on a Budget Newsletter for weekly articles, tips, information and resources. To Subscribe mailto:hbb_newsletter@a1ebiz.com

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The Pros And Cons Of Credit Card Debt Settlement

Are you a self-confessed shopaholic who buys anything and everything that you get your shopping addicted hands on? Such thoughtless and impulsive buying will most likely result in the accumulation of a bunch of junk that will simply collect dust. Can you even remember that silk scarf you just had to have and since it was a virtual steal at 50% off you just had to buy it? Where is it now and how many times have you actually worn it? Is it still fashionable?

If you’re like most people, chances are you’ll have to rummage through bins and bins of collected shopping "litter" which you’ve accumulated through the years, just to be able to see that once precious scarf. You may still be in a state of denial by saying "Fashion goes round and round and that scarf will have its shining moment once again."

Unfortunately, many people fall into this mode of impulsive buying that they really can’t afford and before they realize it they become saddled with debt. If you fall into this category, you’ll soon need to learn a thing or two about debt settlement which can assist you in extracting yourself out of that self-imposed state of financial trauma and begin to start rebuilding your life bit by bit. And the time to start is now! Of course, you have to be honest with yourself, admit that you’ve got a serious debt problem and then humble yourself enough to seek the help you need to pull yourself out of this devastating ordeal.

First things first, a lot of people may actually think that they only have a few choices when it comes to solving their debt problems. The two most common options for those who are burdened with enormous amounts of debt are either to consider declaring bankruptcy or debt consolidation Unfortunately, if you take the easy way out by declaring bankruptcy, it will leave an embarrassing and indelible mark on your credit report for up to 7 years, which will result in higher interest rates, less credit and if you try do qualify for a mortgage (some lenders do give loans immediately after bankruptcy) you will most likely not be able to get a loan to cover 100% of the financing you need. Normally, an 80% first mortgage and if you can get a second mortgage, it will be at much higher interest rate and probably only 10% of the loan value for a total of 90% of the loan to value and you’ll have to come up with 10% down.

Clearly, everything will come with a higher price for a period of time but you’ll have to weigh that with a straight debt consolidation solution in which you pay off your debt. However, in many cases you can negotiate with the collection agency and it’s realistic to get 25% - 50% of the debt forgiven, if you can show that you’ll continue to make monthly payments until the remainder is paid off.

Many of the debt settlement / debt consolidation companies were actually established by the credit card companies themselves. Why, you ask… because it only makes sense for the credit card companies to help you pay off your debt because they can either forgive some of the debt or reduce the interest rates, lower the monthly minimum payment requirements or some combination and get paid a portion of the money owed or receive nothing if you declare bankruptcy. What would you do if you were in their shoes? The answer is obvious. This is why a lot of people who have been saddled with debt are now being offered debt settlement. Of course, not all debt consolidation service companies are owned by credit card companies but many are.

Some groups offer debt settlement programs through arbitration. The "selling point" when it comes to these kinds of solutions is that debt settlement will actually help end your debt problems, without having to go through declaring bankruptcy, without having to pay overcharged debt consolidation program fees as well as helping you avoid getting caught in the debt consolidation trap that a lot of people have fallen victim to.

In many cases, what the organizations do that offer debt settlement services is negotiate your debt down with the collection agencies that have been given your case. I would encourage you to contact a number of companies to ensure you feel comfortable and that you are working with a quality company that doesn’t over-charge you for their services.

On the other hand, if you would really like to save money, which only makes sense since you are already heavily in debt… then negotiate with the collection agency yourself. It’s not difficult, rather than getting upset when you get called night after night simply tell the collection agency rep that you would like to pay off your debt but you can only do it if you can get it reduced and then ask them that you would like to get the debt you owe reduced by 50% - 60%, even 75% and ask them to see what they can do. Ask for a lot up front because as in any negotiation there’s always a give and take. Believe me, they will go to work for you and your offer will be seriously considered because they only get paid when they collect and it’s better to get their percentage on a smaller amount than "diddly squat" on the full amount.

Of course, you’ll have to decide what route you want to take… bankruptcy versus debt settlement but shop around and realize that you do have options. The internet is full of companies offering their bankruptcy or debt settlement services, but be careful and don’t let them push you around and never work with anyone you don’t feel 100 percent comfortable with.

By: Kevin Erickson

Article Directory: http://www.articledashboard.com

Kevin Erickson is a contributing writer to the following websites: www.aneyeondebt.com/ and www.debtmergeresources.com/. This article may be reproduced only in its entirety.

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