Do you have huge amount of credit card debt and want to get rid of your debts quickly? Are you facing difficulty to pay off your credit card balances in full? In such a situation, you can consider debt settlement option to get rid of your credit card debt quickly. It is a debt relief option in which you become debt free by paying less than what you owe on your credit card bills. However, usually creditors agree on reducing the outstanding balances only when you have missed the minimum monthly payments for 3-4 consecutive months.
Read on to know how a debt settlement program can help you get rid of your debts and how you settle your debts all by yourself.
Debt settlement program – How it functions
There are several settlement companies and you can choose a reliable one to pay off your credit card bills/debts.
When you enroll in a settlement program, a debt negotiator, on behalf of the settlement company, starts negotiating with your creditors to reduce the outstanding credit card balances to about 40-60%. In the meantime, the negotiator assesses your financial condition and decides upon a monthly amount that you need to deposit into your settlement account. As soon as one of your creditors agrees to a reduced payoff amount, you need to pay the creditor by using the funds accumulated in your settlement account. In this way, you pay off one creditor after another and get rid of debts relatively fast.
Debt settlement – Tips to negotiate on your own
Instead of getting professional help, you can settle your credit card bills all by yourself. By doing so, you can save the amount that you otherwise need to pay to a settlement company as professional fees. Here are some tips which you can follow if you decide to settle your unsecured debts on your own.
Explain your financial situation. At first, assess your financial situation to calculate how much you can pay to your creditors. Then, meet your creditors and explain your financial situation to them that you won’t be able to pay back the balances in full. Then, request to reduce the payoff amount to about 40-60% so that you can pay back the reduced amount.
Do not negotiate over phone. It is always better to talk face-to-face with your creditors instead of communicating with them over phone. Even if you negotiate over phone, follow it up by sending a mail with return receipt request.
Inform creditors about approaching SOL. If required, you can inform the creditors that the Statute of Limitations (SOL) on the debts are approaching and therefore, there’s limited time to reach an agreement.
Get everything in writing. You should get everything in writing and sign an agreement with your creditors before you pay the amount agreed upon. You should also request a receipt stating the amount you’ve paid to the creditor.
Keep all record of communication. Keep each and every record of your communication so that you can produce it in future if required.
It is advisable that you choose debt settlement option only when your financial condition doesn’t permit you to pay the bills in full and you want to get rid of the debts quickly. This is because your credit score may get reduced by several points when you opt for settlement. However, settlement is a much better option if the only other alternative is to file a bankruptcy. There are also debt relief services available for people, that some might consider as well.
Editor’s Comments: I certainly hope to never be in the situation of having to deal with a scenario like this. Spend less than you earn, squirrel away the money, pay bills in full and on time, tell the difference between wants and needs – hopefully these behaviors will help avoid a situation such as this.