Every year, more consumers become overwhelmed with debt. Some are looking for a way to substantially reduce their debt. One way to achieve this is with a debt settlement. There are several procedures you can use if you want to settle your debt. Your credit report will be affected negatively after a debt settlement and your credit score could be lowered. If you decide that a settlement is best for you, contact your creditors.
Creditor Contact
If you want to settle your debts you should contact the creditor you want to settle with and let them know your situation. If you can afford to make your payments and don't feel any type of financial strain on your budget then settlement is not the right option. If you are unemployed or your income has been substantially reduced, a debt collector will be more willing to settle your debt. They feel it is better to receive something than nothing at all. How much you settle for will depend on your negotiating skills. You might be able to settle for as little as 40 percent to 50 percent of your outstanding balance.
Debt Relief Programs
Debt relief programs will help you settle your debts for less than what you owe. They contact your creditors and work out a settlement agreement. Sometimes the agreement is in the form of a lump sum payment and sometimes you make monthly payments on the settled debt. Contact several companies to see which one has the terms and conditions that satisfy your needs.
Consumer Credit Counseling
If you contact Consumer Credit Counseling, you will be able to speak with a trained counselor who will be able to set up a spending program for you. They can refer you to a debt-management program, which is part of the service they provide, to get your debts settled. While you are in this program, you might want to refrain from using your credit cards. This will ensure that the program works effectively and efficiently and keeps you from accumulating more debt.
Written Agreement
Collection agencies are third party debt collectors who handle the bad debt accounts for creditors. If your account has been turned over to a debt collector, they will be more than happy to settle your account. When you reach a settlement agreement, make sure you get written documentation from the creditor before you send any money. This will be your proof, and serve as a paper trail, that you had a legitimate settlement. In the past, some debt collectors have tried to collect the balance on accounts that have been paid by settlement.
Classification
A debt settlement will be classified as such on your credit report. This information could prevent you from obtaining credit in the future. As part of your settlement agreement, you might be able to convince a creditor to leave this information off of your credit file. If you are successful, make sure this is in writing as well.
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