A Debt Settlement Plan is an excellent financial option if you find
yourself struggling to pay your bills, but are still solvent. In other
words, you have more assets than liabilities and are able to pay your
debts on time.
If you choose to proceed with a debt settlement plan, the best
choice is to hire an experienced debt settlement firm to represent you.
The firm will approach your creditors and negotiate on your behalf to
reduce your debt.
These companies usually require that you have a minimum of
$10,000 in unsecured debt (unsecured debt includes debt from sources
such as credit cards, lines of credit, or personal loans that are not
secured by a physical asset), as well as a steady source of income and
the ability to repay at least 50-60% of your debt.
The debt settlement plan can be negotiated to involve specific
creditors. Once you have set up a plan, you stop paying your monthly
bills to the creditors involved and instead make a specified monthly
payment to your debt settlement plan. These payments are then used to
pay a portion of your debt to each creditor.
Most people who enrol in debt settlement plans are able to reduce
their debt by about 50% and reach a settlement with their creditors to
pay off the plan within three years.
The main disadvantage is that it will have a negative impact on
your credit rating. However, if you’re serious about reducing your debts
and not trying to borrow more money, a poor credit rating shouldn’t
have a major impact on your life. Over time, you can gradually restore
your credit rating by making smart financial choices. You can even get a
secured credit card to give you access to the convenience of a credit
card, without acquiring more debt or incurring interest charges.
The major advantage of a debt settlement plan is that it can
immediately improve your cash flow, allowing you some breathing space in
your monthly finances. When your creditors agree to the settlement and
it is paid, there is no chance that you will receive collection calls or
be the target of legal action.
You can target your debt settlement plan to include specific
creditors, reducing your debts enough to allow you to get back on your
feet financially. If you’re struggling to make ends meet every month,
this can be a real stress reliever.
Your fees to the company representing you are paid out of your
debt settlement fund, so you don’t have an extra payment to make. This
also ensures that the fees are within your budget and affordable.
It’s important to choose a reputable debt settlement company that
has been in business for a long time and has a solid track record.
Unfortunately, there are unreliable companies out there so you have to
be careful to choose a firm that you trust and that feels right to you.
If unsure, you can always check with your local BBB.