If you are in debt, one of the first things you should do to start the process of becoming debt free is to make sure that you understand the debt settlement process. Debt settlement is a multifaceted process, which includes viable options for eliminating debts through affordable monthly payments or reduced balance offers. Reduced balance or reduced interest offers involve creditors agreeing to lower the amount you owe. In exchange you agree to pay it off in full within a specified and limited timeframe.
If you are interested in pursuing a path where you issue monthly payments to pay back your debt, options for monthly payments are also presented by creditors to get some or all your debt paid back to them. In exchange for establishing these monthly installment plans some creditors agree to cease submitting negative reports to the major credit bureaus, provided you make all payments on time and in full.
This type of credit debt relief has an appeal to many consumers based on its surface-level benefits. What consumer would not appreciate monthly payment options and the potential cessation of negative credit reporting? Risks to this method of debt relief do exist, however.
Your debt is only fully forgiven after the total balance is paid down to zero, including any interest payments. Payment terms typically last two to three years. If you are unable to make any payments as agreed before the term is complete your initial debt is not forgiven.
Creditors are not required to agree to debt settlement plans. They do so as a courtesy, which means your new rates and payments might not be much lower than they were initially.
It is important to go over all service terms and conditions before signing any agreements, including:
- Pricing and fees.
- Amount of time needed to pay off your debt in full.
- Amount of deposit required.
- How much of your deposit is used toward your debt payments.
- Frequency of reporting and status of balances owed.
- Penalties for defaulting.
Negotiating with creditors is possible on your own. You might get better rates, terms and conditions if you hire one of the many professional debt relief companies available today. This is especially true if you have many simultaneous debts. A debt settlement company organizes a payment plan and budget to pay off your debts in a methodical order. Most debt settlement companies are legitimate, but some are not.
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