Debt Settlement - What Does That Mean?
When you are in debt over your head and you know there is no way out on your own you may be need to think about trying to reach a settlement with your creditors. Your situation is not unique. Most people have found themselves with financial difficulties at some point and sometimes settlement is the best option. Debt settlement is a serious step, however, and should be carefully understood and considered.
Once a debt is past due it begins to grow at a rapid pace. This is because of the many late fees, over limit charges and other penalties that are charged to the account each month. If you have not been able to reach an agreement with your creditors you may need outside help.
Debt settlement puts you in touch with an agency that specializes in helping individuals deal with serious debts. Debt settlement agencies will review your situation to see if you qualify. Debt settlements are mainly done for unsecured debt.
This includes unsecured credit cards, store charge cards, gas cards, and the like. There is nothing backing the extension of credit except your good name. Creditors have taken a risk with you as to whether you can repay any debt that you create.
Creditors have the right to report your debt settlement to credit reporting agencies. This means that a debt settlement will have an impact on your credit scores. These affects could be somewhat long term so you want to consider this before moving forward with debt settlement.
Once your case has been accepted, the debt settlement agent will look at several factors to determine a repayment plan for the debt. The amount of the debt is important. It needs to be beyond your ability to repay without some intervention.
Interest rates and late fees will be considered first. The settlement agent will see if he can negotiate a reduction of interest charges or the forgiveness of certain fees or penalties to help you focus on repaying the principal amount of the debt.
Working with an agency, the monthly payments agreed upon are made to the debt settlement agency. From there, they forward the payment to the appropriate creditors in accordance with the terms of the debt settlement. Your payments may include their fee for the services rendered.
Once a debt is past due it begins to grow at a rapid pace. This is because of the many late fees, over limit charges and other penalties that are charged to the account each month. If you have not been able to reach an agreement with your creditors you may need outside help.
Debt settlement puts you in touch with an agency that specializes in helping individuals deal with serious debts. Debt settlement agencies will review your situation to see if you qualify. Debt settlements are mainly done for unsecured debt.
This includes unsecured credit cards, store charge cards, gas cards, and the like. There is nothing backing the extension of credit except your good name. Creditors have taken a risk with you as to whether you can repay any debt that you create.
Creditors have the right to report your debt settlement to credit reporting agencies. This means that a debt settlement will have an impact on your credit scores. These affects could be somewhat long term so you want to consider this before moving forward with debt settlement.
Once your case has been accepted, the debt settlement agent will look at several factors to determine a repayment plan for the debt. The amount of the debt is important. It needs to be beyond your ability to repay without some intervention.
Interest rates and late fees will be considered first. The settlement agent will see if he can negotiate a reduction of interest charges or the forgiveness of certain fees or penalties to help you focus on repaying the principal amount of the debt.
Working with an agency, the monthly payments agreed upon are made to the debt settlement agency. From there, they forward the payment to the appropriate creditors in accordance with the terms of the debt settlement. Your payments may include their fee for the services rendered.
About the Author:
Are you tired of struggling to keep up with your credit card balances? Get some simple credit card tips on the Debtopedia website. Visit http://www.debtopedia.com for a free copy of my "Secrets Of Credit Card Debt" report.
posted by Credit Counseling at
8:09 AM
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