Originally posted 2010-02-27 21:00:18. Republished by Blog Post Promoter

This article is a must for anyone considering debt settlement but doesn’t really understand it. It explains exactly how it works and why it’s probably not for you. It will hopefully clear up all misunderstandings, and answer all existing questions.

In general terms, debt settlement refers to a process by which you or a representative negotiates with a creditor to get any, or all of;

a) a reduced interest rate b) a lower balance or forgiveness of debt c) a reduced monthly payment

The above states what debt settlement sets out to achieve and the following describes the ins and outs of the process.

1) You will need cash to make debt settlement work, and if you don’t have any then forget about debt settlement.

2) You won’t be offered a payment plan, but will have to pay a lump sum to either the creditor or his representative.

3) Settlements of debts will most often range between 25% to 70% on the dollar depending on the creditor.

4) But some credit card companies may offer as little as a 10% reduction and will simply say, "take it or leave it", and some lenders won’t offer a deal at all.

5) The best time to start the debt negotiation process is when you are three to four months delinquent because many lenders won’t even discuss the issue if you’re current. You should therefore expect to receive at least two months of letter and phone harassment before you instigate the procedure.

6) Credit card companies and collection agencies make it difficult and frustrating to talk to somebody in authority, so expect to be kept on terminal hold for hours upon hours.

7) Creditors have little or no interest in how much you owe other lenders, and are only interested in getting the highest settlement amount that’s possible. This makes the handling of multiple accounts, which you almost certainly have, very difficult and very frustrating since you’ll more than likely have to go back to lenders several times in order to work out deals that will satisfy all of them.

8) You will be put under a lot of pressure to move quickly, and you will be asked time and time again to wire money within a few hours. The thinking behind this is that it will increase your stress and result in the recovery of money.

9) In spite of the pressure that you’ll be put under, you will have to insist on getting any and every deal in writing before you make any payments because if you don’t, you’ll more than likely get demands for more money.

10) Your credit score will be very adversely affected.

After reading all of the above, you may understandably be tempted to get a debt settlement company to handle the negotiations for you, and there are of course debt settlement agencies that are reputable and reliable, but be careful.

The present economic crisis has spawned a whole host of new companies that often know less far less than is written here about debt settlement, and there are many others that are out and out rip-offs.

Never even consider paying a debt settlement company an upfront fee or any kind of deposit, and always be sure to check out a company with the Better Business Bureau before you sign anything at all.

My personal opinion is that the vast majority of lenders have little or no interest in debt settlement, and would much prefer to simply extend a little more credit in order to ensure that the borrower keeps making endless minimum payments, and incurs ongoing finance charges.

Scores of excellent credit counseling agencies exist however, and many of the best ones will even handle debt settlement. They’re inexpensive, and if you have debt problems and haven’t tried one, then please do so right away.

The author of this article was a film producer, and award winning film sound editor for many years. He has a passion and a flare for economics, and one of his websites -> http://pay-off-debts.org features the famous Get Free In Three system which has helped a huge number of people get out from under suffocating debts.

Article Source: ArticleSpan

Filed under: Debt Collection Articles

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