Debt settlement or credit settlement is an approach to reduce the debt amount. In this process, both parties (the debtor and creditor) mutually agree or settle on a reduced amount of what is owed. It means that the new, lesser balance will now be regarded as the payment in full.
Debt settlement is also referred to as debt negotiation and debt arbitration. Often people confused it with debt consolidation or counselling, but in the latter terms, the debtor makes payments every month to the debt consolidator, who deducts or takes a fee and send the rest of the balance to the creditors. In debt settlement, the debtor makes a monthly payment to the debt settlement company, which doesn’t charge any upfront fee but takes only a certain percentage of the debt for negotiation or the legal work before sending the payment to the creditor.
Usually, the debts that are eligible for settlement are unsecured debt such as medical bills and credit card bills. Moreover, you can settle your overhanging debts in different ways. You can either choose a professional individual to do this task for you, you can seek the assistance of a good debt settlement company, or you can buy debt settlement leads.
How Does It Work?
If you are finding it hard to pay off your bills, you should contact a debt settlement company as soon as possible or, more precisely, before becoming a defaulter on the bill i.e. before six months. If you don’t reach out to a debt settler before this period, the company that you owed to will surely write it off, which might damage your reputation as well as your credit score. You will need to pay a certain sum of money as a fee to the company for doing the negotiations.
After associating with a debt settlement firm, the firm will discuss or negotiate with the company that you owed about reducing the actual debt amount and settling down to a sum you can afford. But it’s not as easy as it sounds; the company you will choose as your debt settler will need to examine and review your entire documents. It means that it will go through your asset reports, credit card balance, bank statements, documents related to what you owe, and other paperwork. After all the things have been reviewed, the firm will negotiate to lessen the rate of the debt on your behalf.
Should You Blindly Trust Every Settlement Company?
No, you need to be careful. You have to keep your eyes open while dealing with a debt settlement company. Most companies help you a lot in getting rid of the debt, but not all are the same. Some of the firms might promise you more than they can truly deliver or make bogus promises. That is why dealing with a debt settlement company is sometimes risky. You have to be very cautious while picking the right company.