If you are struggling to repay your debt, you are not alone. Many households are weighed down by debt and as the slow economic phase continues, things are bound to get worse. Paying multiple debts at the same time can be a daunting task. In most cases, you will end up defaulting and this, in turn. destroys your credit score.
In such a situation, it is important to look at alternatives that can give you some breathing room while at the same time get you out of your current financial mess. Debt settlement has become a popular alternative for household owners wishing to control their debts. If your debt feels like an anchor dragging you down into an abyss, it is time to consider this debt management approach.
Well, like many other solutions used by consumers to handle debt, there are many concerns you will come across. As such, you need to get more insight on what settlement of a debt entails in order to make an informed choice.
Below is a guide to demystify this financial management approach:
- Debt Settlement in Detail
This is a system where a consumer is unable to repay the owed amount as agreed in the contract. To avoid any further damage to your credit score, the settlement company will come in and negotiate with your creditors. Your monthly repayments will not be sent to the creditors but to a trust account. The money will accrue and the payments to the creditors will start. This approach works best for unsecured loans.
- How to Go about Loan Settlement
There are different options if you have decided to use settlement to clear your debts. You can opt for a DIY settlement where you negotiate with creditors and sign a new contract on the owed amounts. If you have some legal background, this is a good option. However, using a company or a qualified lawyer is more effective as it gives you peace of mind. The negotiations are handled by a qualified person on your behalf to ensure you get the best settlement deal.
- Finding A Loan Settlement Company
There are many online scams involving debt programs in the U.S. With online services, it is easy for companies to hide behind a cloak of anonymity. However, you should always read reviews from other clients, ask about the company’s physical address and their track record. Any company asking for an upfront fee is a scam because payment should only be after your problem is solved. If the company claims they can get you out of debt, remember this is impossible because you have a legal contract with your creditors.
- Legality of Loan Settlement
If you are struggling with multiple debts, it is important to look for a legal option to get some reprieve. The Federal Trade Commission (FTC) regulates this industry and as such, you must ensure the company you use has the appropriate licensing. Most unscrupulous settlement companies have had their licenses withdrawn.
Always make sure you check the credibility of the company with your local BBB, online reviews and find referrals from other users.