4 Things to remember before you go for debt settlement
Author: Robin Williams
Debt settlement (debt arbitration or negotiation) involves negotiating with creditors to accept payment that is less than the full amount of debt you owe. It reduces 40%-60% of the amount you owe. You start accumulating funds in a special account until you pay a lump sum to a creditor. This is repeated till you have paid back all your loans. A professional debt settlement company contacts creditors so that you don’t have to deal with their harassing calls and reduces payments.
4 Things to keep in mind before you negotiate debts
Here are a few important things you should remember before you settle your debts:
1. Know the debts you can settle: Unsecured debts like medical bills, credit card debts, store cards, personal loans, etc as creditors have no guarantee that they will receive anything from you. Secured home/auto loans cannot be settled.
2. Keep records of your loans: You should have a written copy of your debt transactions. Your records will help you settle debts better and faster.
3. Don’t rely on verbal discussions with creditors: Don’t talk to your creditor or your collection agency (CA). Try to have all correspondence via registered mail.
4. Know all details of creditors and CA: Always note the details – address, name, phone and fax number of your creditor or the collection agency (the third party responsible for collecting debts).
Remember, the longer the debt remains uncollected, the better your chances of settling it, although this doesn’t mean you won’t have to repay eventually. But taking time means that you have difficulty in paying off bills and therefore creditors will go for a settlement instead of a full payment. Generally, settlement can be completed in less than 36 months and your creditors are happy to receive a fraction of the total outstanding amount instead of you filing a bankruptcy (inability to pay at all).