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5 Commonly asked questions about Debt Settlement
Americans are becoming more aware of their debts and searching for a way to become debt free. Bankruptcy filings are at an all-time high as well as foreclosures and credit card debt. Consumers are being forced in to solutions that are devastating to their financial health. Whether it is as loss of income, a cut in salaries or health reasons it is becoming very difficult to keep up with our everyday needs. Debt settlement programs seem to be the one answer that consumers have been searching for. The debt settlement program should be the program that consumer should do before filing any type of bankruptcy. Bankruptcies can cause serious financial hardships that cannot be undone any time soon. Bankruptcy is very public and very devastating to ones finances for many, many years. Recovering from a bankruptcy is extremely hard and makes it tough for creditors to trust the consumer in future credit endeavors. Debt settlement has minimal consequences compared to bankruptcy. Debt settlement is a way to settle debts with your creditors without the stigma of a bankruptcy. The debt balances are lowered by 40 to 70% in most cases, the consumer is than able to pay back the debts with an extremely low minimum payment. The debt settlement program will show on the consumers credit score, but when the debts have been paid the consumer can then start to repair their credit score. This type of program usually last anywhere from 12 to 48 months with the option to pay the debts off sooner if the consumer so desires. Below are some of the reasons that consumers should look into the debt settlement program and why it is a better option for most.
- Many consumers can work out a settlement with their creditors but need to pay the settled debts immediately. This is ridiculous, if consumers had that type of money chances are they would not be in the situation that they are in. In the debt settlement program consumers are able to receive a very low payment on the settled debts. This is obviously a more manageable way to pay the debts off. Interest rates are usually dropped completely which gives the consumer a way to pay off their balances directly instead of having most of their minimum payment going towards interest. If the consumer is able to pay more towards their minimum payment they are encouraged to do so without penalties.
- The debts that qualify for the debt settlement program are unsecured debts. Unsecured debts are debts that are not tied to any type of collateral such as a home, a car or land. The types of debts that are unsecured would be credit cards, personal loans, medical debt or collections. Basically any debts that are not attached to personal property can be settled.
- As stated above one should always seek the debt settlement program before any type of bankruptcy. Bankruptcy can destroy a consumer’s credit for 7 to 10 years. Bankruptcy is very public and can hinder the filers from receiving any type of credit, a job or entering in to any type of rental agreement. Once the bankruptcy is filed it becomes public information that anyone can have access to. Most creditors, landlords, and employers will not want to take a chance with the consumer because they feel they are not trustworthy.
- Not only do the consumers receive a low payment but one payment, and an option of when that payment is due. Being able to set up your own payment date and have one payment makes paying the debts a lot more manageable.
- Once the debts have been paid the consumer is able to clean up their credit and establish more credit. Getting a pre-paid credit card will help the consumer to establish this. Keeping up with the minimum payments for at least six months the consumer will see their credit score starting to climb.
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