Debt resolution can be defined as debt repayment plan where people negotiate with their creditors and get them into accepting partial payments of debt. The debtors need to pay only a certain percentage of the outstanding debt balance if they are successful in negotiating with the creditors. In this case, the remaining amount of the debt gets cancelled by the creditor. In other words, debt resolution involves getting the services of debt settlement firms that possess the ability of helping the debtors in negotiating lower payments on open accounts, credit cards, collections and personal loans.
Nevertheless, it is important for individuals under the burden of huge debt to make their choice of debt settlement companies carefully. This is because the market in this category is filled with companies that misleadingly advertise or promote their services as to consolidate debts or debt consolidation. They mislead the consumers into thinking that they would have all their loans consolidated in one place. People should take care not to go for the services of such agencies. You must always make the choice of a debt settlement company that works with the objective of negotiating a debt resolution with lending organizations or creditors.
The Work Procedure of Debt Settlement Organizations
Going for the services of debt settlement organizations means you are using these agencies for negotiating with your lending organizations or creditors on your behalf. The main job of these companies is negotiating a lower and newer amount that you will be paying in the form of debt to your creditor or lender. The process of debt resolution involves the debtor paying a certain monthly amount to his or her debt settlement company. The company then pays a fixed amount to the lender or creditor. Here, it is important to note that the debt settlement firm pays the amount to a creditor only after deducting its fee or commission from the same payment.
The very first thing that your debt settlement firm will ask you to do when you contact the company for debt settlement is stopping all communications with collectors or lenders. The main objective of the company will be getting the lending organizations so very desperate for payment that they will be completely open to accepting settlement deals. Debt resolution is where the collection agency, credit card firm or lending organization agrees to accept a lower debt payment than what an individual actually owes to the lender or the collector. This wipes an individual’s slate clear from his or her financial obligations.
Debt settlement companies
Your debt settlement agency will be taking all your information in regards to the debts you owe to different lenders and collectors. The company and its professionals will further work into negotiating the lowest debt payments with the creditors. Debt settlement companies work in the form of a liaison between the debtors and their creditors. With these companies working on your behalf, there is absolutely no need for you to have any discussions with creditors and lenders. The professionals working for these companies do everything possible for lowering your debt payments and for reaching a settlement that you are comfortable with. Your debt settlement agency will collect all debt payments and make the payments to the creditors. Once all the debts have been paid, the companies will make sure that their clients are not liable for any debts owed to the lenders.
Advantages of Debt Settlement
Debt settlement is not openly suggested as one of the best and the most viable solutions for people to handle their debts. This is mainly because the industry for debt settlement is jam packed with miseducationists and scammers. Nevertheless, if you are careful enough, debt settlement can prove to be beneficial for you. Here are the reasons why debt settlement is considered advantageous.
Will Help You in Saving a Huge Amount of Money
One of the greatest benefits of going for debt resolution is that it will consolidate all your debts. This means that you will have the flexibility of paying off all your debts in the form of just one debt at a certain time of the month. Also, debt resolution means bringing down your debt amount to a level where you are comfortable paying off the debt owed to collectors and creditors. This will be the amount that you will have to pay either on monthly basis or all at once, as per your preference.
Your debt settlement firm will work out everything for you making sure that you do not face any difficulties in paying off the amount you owe to your creditors. The professionals working for your debt settlement agency will negotiate the settlement deal and will put in the best efforts towards ensuring that their offer is accepted by the creditors. Settling on a certain lower debt amount will help you by reducing the stress of making monthly debt payments.
There is even huge time savings as you will be able to make the payment of a huge debt within the shortest time possible. It will generally take you a time span of three to four years to make the complete payment of a huge debt. However, you even have the option of paying off smaller amounts every month.
Debt Settlement Will Help You Avoid Bankruptcy
One of the most important reasons why debt resolution is considered advantageous is because it keeps individuals away from filing for bankruptcy. Filing for bankruptcy means it will have a negative influence on the credit rating of an individual. This will not just be for a month or so but for an individual’s entire life. People with bankruptcies filed will not be able to make important financial decisions. Every time there are certain financial decisions made, bankruptcies will have to be brought forward and eventually the banks will come to know about the same.
Debt settlements remain on the credit reports of individuals for just seven years and then they go off. These settlements do not have any public records like the case is with bankruptcy. Settling the debts you owe to your creditors in the right manner will help you in avoiding the situation where you need to file bankruptcy. This will further help you in being away from going through the hassle of handling the consequences of bankruptcy.
Make Debt Repayments within the Shortest Time Possible
Opting for the perfect debt settlement deal will help you in getting rid of your debt within the shortest time possible. This will be a time span of around two to four years. A time span of two to four years is much less in comparison to the time you would have to spend in paying back your debts in a normal manner. So, it is always a good option to go for debt settlement instead of choosing to pay off your debt in decades by sticking to original debt repayment schedules.
Disadvantages of Debt Settlement
It is not that debt resolution does not come with any disadvantages. When you are going for debt settlement, it does not come as a guarantee that the creditors will agree to the settlement offers presented by your debt settlement firm. Meanwhile, your credit might also suffer and you might end up owing taxes on your debt amount. Just in case you might not know, weighing the advantages and the disadvantages of all kinds of debt solutions is important in order to avoid any problem.
Huge Upfront Fees
Majority of the debt settlement companies operating in the market do not work by values and principles. They generally charge huge upfront fees for the services that they offer. Most of the times, it can also happen that you fall in the trap of unscrupulous firms that do not make any efforts in reaching settlements while charging you a lot of fees.
Credit Score is Negatively Impacted
The credit scores of the debtors can be blown away even if they are successful in settling their debts. Your future creditors will not be fully satisfied when it comes to lending you money in the near future mainly because they find that you have settled a debt amount instead of paying it off completely.
Even if your remaining debt amount is settled by your debt settlement company, this situation might keep haunting you for the rest of your life. It is also possible for you to face the problem of being hounded by the collection organizations for the debt you have settled.
One of the most important things that you need to remain aware of for debt resolution is the scammers. Many debt settlement firms will not inform you about the exact settlement deal or amount you will have to pay even if the amount has been settled. Therefore, the best thing that you can do is carry out a thorough research and go for the services of a trustworthy debt settlement firm. Avoid going for companies that have continuously contacted you for taking their services. Make sure to go for the services of companies that offer free consultations. This will help you in asking relevant questions while discussing the settlement deal at the same time.