Is Debt Settlement Going To Help Or Hurt You

A recent fact came out recently stating that only 25% of American citizens live debt free. The majority of people live with some kind of debt, whether its a mortgage, car loans, or credit cards. For the most part people that take out these debts know ahead of time they can afford to at least make the monthly payments on them. The problem is that if a job is lossed the ability to stay current on the payments practically goes away. Creditors will start to put late fees and possibly increase your rates. Balances on the credit cards will continue to go up. Debt is becoming the financial disease that is destroying many families financial dreams. Debt problems exist all around the map and most families find themselves struggling over one thing or another at some point in time, it is a sad but very true problem going on in the world.  What should you do next?

Over the past couple of years homeowners have been using the equity in their homes as a piggy bank to buy more stuff or consolidate debt. Adding another $30k into a home loan over 30 years would only increase the payment about $100. Homeowners were opening up line’s of credit to pay for bills and stay afloat also. With home prices hitting their peak and now dropping, a large number of homeowners have seen their equity go out the door. This was a good way to go about fixing the problem but is no good if you continue to rack up the debt.

Debt settlement companies promise to reduce your debts by negotiating with your creditors. What they do is combine all of your unsecured debt balances, calculate an affordable monthly payment for you and then settle the remaining balances with your creditors for 30 to 50 cents on the dollar. Debt settlement companies will work with you to plan a monthly payment schedule that will fit within your budget. A time line of when they expect to eliminate your debt will then be given to you to complete. The companies require you to stop making monthly payments so that all of your debts can be totaled and put into one account. When this happens your credit scores will start to decline. If you plan to work with a debt settlement company get them to pay your balances first and then start paying them. This will save your credit report from having late payments. After signing a contract with them they charge a percentage of the total debt that is eligible for settlement as well as monthly maintenance fees. You can negotiate with them about the fees just like how they did with your creditors. No point in giving them lots of money in which you don’t already have. Ask the company how they list their loans on your credit report. If it says credit counseling on it, it might as well say bankruptcy. Mortgage lenders look at credit counseling and bankruptcy the same way.

Personal loans are a great alternative. If you can consolidate all of your bills into one fixed payment this will free up monthly cash flow to help pay down your balances, not run them up again. This route will improve your credit scores the fastest and most cost effective way. These are the hardest to get approved for because you are not putting any kind of collateral up.

When it comes down to it, you are the best way to handle your own debt settlement program. By negotiating your own settlements, you’ll save a ton of money in fees, decrease the risk of creditor backlash, and feel better about the process when you’re done. After you have done the leg work contact a consolidation company and ask them if they would be willing to accept your propasal for a loan. They have nothing to lose because you are coming to them with the hard work done just looking for a fixed rate loan.