Tuesday, September 25, 2018
AliDropship is the best solution for drop shipping
How To Choose The Best Debt Settlement Plan To Handle Your Debt?

To keep up with the pressing needs of life and your family, you may have to take loans in different forms and from different lenders. When you do so, you enter into a legal obligation and agreement to repay it in full along with interest accrued on time and as desired by the banks or any other financial institution. Failing it will first result in penalties and overdue and then into collection calls and other legal processes followed by the creditor to recover the money.

In such a situation when you feel that you are unable to make the payments on time even after putting in your best of efforts, the only option seems open to you is settling your debt for a lesser amount. However, you will find a few of your well-wishers warn you about it pointing out at the dangers of debt settlement, but everything is not bad in such a move. You have to be careful in choosing the best debt settlement plan for that matter.

An Easy Alternative Solution

Debt settlement is an easy alternative solution and is far better than bankruptcy. This is the most prudent way to deal with your ever and over growing debt when all roads come to a dead end.

The debt settlement companies will promise and post alluring ads stating their expertise in reducing debt by as much as 60 to 65 percent and make you debt free in less than six months. Be wise when you choose such a company and avoid the ones that make promises that sound too good to be true because it is.  The best way to proceed is to be knowledgeable about the debt settlement pros and cons and read the debt settlement reviews.

Ideally, the debt settlement companies will help you in negotiating with the creditors to reduce the debt amount, stop the collection calls and formulate a better payment plan that is suitable and affordable for you.

However, they will not explain the potentially negative impact that debt settlement will have on your credit score. When you go through the reviews, multiple ones that are from different neutral review sites, everything will be explained to you quite clearly. You will get the full story of debt settlement if you are seriously considering about settling your debt to resolve the debt issues.

Process Followed By Debt Settlement Companies

When you meet the debt settlement company and tell them about your crumbling financial conditions and inability to pay off your debts, they will ask for the names of the creditor or creditors if you have multiple loans.

  • They will also ask about the amount you owe to these creditors currently.
  • The debt settlement company will calculate the amount by which they hope to reduce your debt.
  • They will also calculate and inform you about the probable monthly payment henceforth.
  • Apart from that, they will suggest that you stop making payments to your creditors and send the monthly payments to the debt settler instead.
  • This amount you pay monthly is put in a savings account till the time it grows into a substantial amount.
  • The debt settlement company then will call up your creditor for negotiating a settlement to arrive at an agreeable amount that is much lower than your original outstanding balance.
  • When the creditor agrees to accept such reduced amount, it is paid from the savings account thus created.

Lastly, instead of their service, the debt settlement company will charge a fee for you that can be a flat fee or a percentage of the amount of debt reduced.

Look Beyond The Obvious

Till now it may sound to you pretty simple and fine to opt for debt settlement thinking that there is nothing bad in it. However, if you go through the debt settlement reviews, you will be able to look at it beyond the obvious.

Going for debt settlement with just superficial knowledge is unwise. It is not as simple as you pay the debt settlement company and the company pays your creditors.

There is more to it. Creditors usually do not settle a debt unless you have failed to pay a few EMIs. This means, if you want to avail debt settlement then you will have to stop making payments to the creditors so that it becomes past due.

Once again there is a catch here. As long as you continue to make late payments or stop paying, it gets reported to the credit bureaus. It means that your credit score will drop and you will start receiving calls from the creditors as well as the collection agencies.

Impact On Your Credit History

Your debt settlement effort may provide you with some instant relief, but in the long run, it will have a serious effect on your credit history.

  • Even if you manage to get your debt settled these reports for late, and failed payments will remain in your credit history for at least seven years.
  • If you want to avail any other loan during this seven-year period, you will have a low loan offer due to such hits in your credit score.
  • Unless and until you start accumulating a positive credit score you will even find it difficult to get a good job and a good rate in insurance due to the interference of the bad credit report.
  • After your debt settlement company is successful in settling the debt, there is no way in which you can remove the delinquency report.

Your credit account will have updated info that will show ‘paid settled’ or ‘charged off settled’ for your debt. A settled status of debt is never good as a ‘paid in full’ account is.

The After Effects And Fallout

After settling your debt, it will take a couple of months or even a couple of years to accumulate positive credit. Till that time you will not receive any approval for unsecured credit. Moreover, as per the IRS guidelines, debts waived are considered as your income, and therefore you are liable to pay taxes even if you do not receive the Form 1099-C from the creditors.

Author Bio:

John Bell has been writing articles on Social Media, skilled business consultant and Financial advisor for the last few years. In this post, he has written about the benefits of Social Media Marketing, Business, Finance as well as the features related to the same.

AliDropship is the best solution for drop shipping
Tags: ,
Does my profile interest you? You have any article writing requirements or if you want a blogger, do get in touch with me! I will be glad to write blogs, articles, reviews for you.Send me the details using contact form! Do drop me a line and your phone number and I will be there to help you.I am a freelance content writer since a long time.

0 Comments

Leave a Comment