debt settlement

Things to Know About Debt Negotiation

September 9, 2013 by penn

When simple management of money can’t save you from extreme debt, debt negotiation is one of the ways that a person can become financially free. There are many reasons that an individual can become in debt. It could be a loss of a job, increase in bills, or some other unforeseen situation that can help place you in debt that you are unable to handle.

Remember When Negotiating

When you decide to negotiate with your creditors regarding your debt, it is important to remember a few tips.

Prioritize: Placing your bills in an order from most important to least can help you to determine what debit should be paid off first. Commonly one will want to eliminate the lowest debts first; however there are some types of debts that are more important than others. Make sure you prioritize wisely.
Saving and Budgeting: When walking into a debt negotiation you will need to have something to offer. One way to do this is through lump sums. They do not always have to be large payments, but you will be required to make a payment at the completion of a debt negotiation. The best way to save up money is through reviewing your budget. Write all your bills and pleasure expenses going out and income coming in. Determine where you can trim your finances to allow payments, never offer to pay more than you actually can afford.
Record the Call: It may seem silly to record the phone call you make to the creditor; however it can be your best ally. Telling your creditor that you are recording the call can help to ensure that your creditors will be peaceful, respectful, and possibly increase your chances of getting a helpful negotiation. Do not get emotional when dealing with your creditor. Explain your hardships, but do not tell them your life story. They most likely won’t offer much sympathy because they are looking at the benefit to them.
Bankruptcy or Brag: One thing that is important is that if you are considering bankruptcy mention that you are leaning this way. To file bankruptcy you will discharged of all debts and the creditor will lose out on all return of the money. Losing some rather than all of it is a better bottom line decision. If you aren’t looking into bankruptcy you may want to brag about your money management skill during your debt negation. If you have tried to make payments on time, let them know of your efforts and successes.
New Terms: When looking into creating new terms to your debt you want to make sure that you aim to have 50% of the debt reduced. Begin with a very low lump sum offer, 20% to 25%. Keep firm don’t accept anything that you know you can’t pay for monthly.

Different Types of Debts

There are different kinds of debts and each one should be handled differently through the debt negotiation process.

Consumer and Credit Cards:

Consumer and Credit cards can be one of the most negotiated of all the debts. These companies are more willing to help during debt negotiation because they know they are the first to be discharged if one goes through bankruptcy.

Secure Loans and Mortgage Lenders:

You will probably have more difficulties with debt negotiation in comparison to the credit card companies. However it might be possible to negotiate for a loan modification. This could help to reduce your monthly payments. Another option might be a home refinancing; this can lower your payments as well. In the case of both a secure loan and a mortgage smaller banks are going to be more likely to negotiate.

Student Loans:

When undergoing a debt negotiation about your student loans, it is important to remember something. This is one of a few types of loans that cannot be discharged through filing for bankruptcy. The positive is that there are government programs that can help you with this debt. They can help you to reduce the monthly payments and sometimes they can even help you cancel out the loan entirely.

If you decide that you are unable to do this yourself that is okay. Search for a debt relief service that can help you with your debt negotiation. However, you will be asked to stop making payments to your creditors while going through the negotiation process. Don’t take advantage of the extra money, place the money you would normally put into the creditors into a savings account. This will give you the ability to offer something to the creditors once the negotiations are in full swing.

No matter what your decision on debt relief make sure that it is the right choice for you. Ensure that you are confident in what you are doing when it comes to debt negotiation.

The Dangers of Having Debts

September 1, 2013 by penn

When a person has debt they want to find ways to get rid of it. Having debts can cause you to have lower spendable income per month. There are many ways that you can reduce having debts through relief programs. There are also ways that a person can stop having debts with some simple ideas.

Reduce Simple Problems

When you have debts you are able to do something simple things that can help you while trying to reduce the debts.

Budgeting will help: Having debts can take a toll on someone’s income. It is important to remember that you should have a budget. List all your current monthly expenses. Cut back on the extravagant, or unneeded expenses.
Too Many Banking Accounts: It can sometimes be difficult to keep track of your spending and your balances in the accounts when you run several bank accounts. If you have accounts that you no longer use, close them, reduce your unneeded accounts. It is important for a person to have a checking account and a savings account, anymore than that is too much.
Avoid New Credit: Avoid gaining new credit balances. Sometimes when we have an extra expense it can seem like the only thing that can fix it is gaining new credit. However, new credit can only cause more trouble and more bills.
Make Cash Transaction: When you use cash you tend to spend less money that those credit card purchases. A person also is more careful about their purchases when they are required to save cash for the larger purchases.

Debt Elimination Pitfalls

There can be a lot of pitfalls that one can obtain while having debt. Some of them are major pitfalls while others are only minor ones.

Don’t Close Your Accounts: Whenever you begin closing your accounts it can have the negative effect. You want to make sure that you are paying off the amount you owe before closing the accounts. There is a negative mark on your credit report for having debts that have be closed rather than paid off.
Personal Information: When you have debts you might search for someone to help. This can be a wonderful solution however you want to make sure that you find a reputable company. Companies that require upfront fees and ask too many personal questions are ones that you might want to steer clear of.
Minimum Payments: It is common for people to look at the minimum do and only pay that to allow more funds available in their monthly budget. You will pay off more of the principal and reduce your interest charge every month, if you pay more than the minimum due.

Types of Debt Elimination Programs

There are many programs that offer ways of helping those who have debt be removed.

Debt Management

Debt Management is the type of program that is designed to help you budget. A financial counselor will help you to design a monthly budget that you can afford. They can also help you to formulate a plan to repay your creditors without causing anymore damage to your credit score. They also negotiate with the creditors on your behalf to reduce your monthly payments through interest reductions. You will need to stick with the plan as it is a way to financial freedom.

Debt Settlement

Debt Settlement enables to balances to be reduced. A debt settlement company will negotiate on your behalf to the creditors to reduce the amounts that you owe each one. They will due this through getting the interest as well as the principal balance reduced. When you have come to an agreement with the creditors you are able to make lump sum payments or payment schedules to pay off those amounts in the timeliest fashion possible. This approach can affect your credit rating for a few years; however after that time you will be able to rebuild your credit.

Debt Consolidation

Debt Consolidation is a combination program. A consolidation service can either help you through setting up an account for you to make a monthly payment to and they disperse it among your creditors, after reducing the balances due. The other option is to have them confer with creditors regarding reducing the balances and then paying them off through a consolidation loan. This will doesn’t affect your credit score as you’re not settling the balances but paying them off. With this form of debt relief you have to be sure not to miss a payment because it can cause the agreement to become no longer valid.

Whenever you decide to take control of your financial freedom these few things might help you along the way. Remember that each person’s situations are different so do what is best for your personal needs. Having debts can debilitate people for a very long time, so take back your financial freedom and become debt free.

Don’t Ignore Credit Card Debt And Just Consolidate

June 18, 2013 by penn

Ignoring your credit card debt is probably the worst that you can do. If you really want to remove your debt problems so you can live in peace, pretending it does not exist should not be one of your options.

There are so many things that will be affected when you refuse to acknowledge your card debt. First of all, the interest and late payment penalties will continue to pile up and grow your debt amount. If you started with $5,000, it can grow to $10,000 if you refuse to pay any amount towards it. Even if you stop using it, as long as it has a balance, the card debt will continue to grow.

Your card debt also ruins an important part in your life: your credit score. If you had plans of setting up your own business or buying a house, your credit card debt will keep you from reaching these goals. Your credit score reflects your attitude when it comes to your finances. Even your employment opportunities, rental option, business partnerships and loan interest rates will be compromised with a bad credit score.

Fortunately for you, there is a way to solve your credit card debt and that is to consolidate it. You have two options: pay down the debt through debt consolidation or reduce the amount through debt settlement.

Debt consolidation help restructure your debt payments so the balance is stretched over a much longer term. The goal here is to lower your monthly contributions without being penalized for it. Take note that you will still end up paying for everything that you owe so you have to make sure that your income can support it. There is a possibility of getting a lower interest rate with the new payment plan that debt consolidation will set up for you. That will decrease the monthly payments even further but do not bet all your savings on it.

If you need further reduction, you may be better off with debt settlement. This option involves negotiating with your creditors and convincing them that you are in a financial crisis. Explain to them how this crisis rendered you unable to keep up with your payments. It can be an illness or a recent job loss. Give them the details and let them know that you still take full responsibility for the debt. It’s just that recent events made it impossible for you to meet the minimum requirements of your debt. You will then offer to pay pennies for every dollar. If you and the creditor agree on a settlement price (e.g. .50 for every dollar), you only pay that percentage and have the rest forgiven.

While the latter option may seem like the better choice, know that your credit score will suffer because you will have to default on your payments. That is one of the ways to convince your creditors that you are in a crisis.

Choose between the two based on your financial capabilities. You can always grow your income so you can afford the first option. Just remember that your debts are your doing and thus you are responsible for completing its payments. Don’t ignore the problem that you created because this is one of those that will not go away on its own.

Is It Better To Consolidate Or Settle Your Debts?

May 31, 2013 by penn

Are you torn between consolidating and settling your debts? Both of them can effectively get yourself out of debt but you have to realize that one of them suits you best. The key to maximize the benefit of the two is to choose the right one.

But how do you make the right choice? What are the factors that will tell you which is better than the other? The answer is simple: you need to know the process of both and what they can provide you in terms of a debt solution.

Debt consolidation loan involve applying for a loan that will allow you to pay off the other debts that you have. The key is to get a low interest loan that will lower your monthly payment. Because of this lower payment, you are able to bring more breathing space for your budget. That will allow you to have more funds on entertainment activities or to boost your savings.

Debt settlement, on the other hand, involves negotiating with your creditors. You will haggle with the creditor so they will allow you to pay only a portion of what you owe and have the rest forgiven. This debt reduction will get you out of debt in 2-4 years, which is faster than debt consolidation loan that can take up to 5 years to complete.

Now that you know what is involved, how will you know which is better? It helps to begin by looking at the type of debt that you owe and your ability to pay them off.

For instance, if you have a steady job and you only have a small deficit on your debt payments, you should be fine with debt consolidation loan. But if you have no income or if it is too small to meet all your requirements, then you may want to opt to settle your debts instead. While debt consolidation will lower your monthly payments it will keep you in debt for a longer time. Not only that, you could end up paying more in terms of the interest amount.

Another consideration is when your credit score is not in its best condition and you do not have a collateral to guarantee a low interest rate. If so, you have to skip debt consolidation loan and go for debt settlement. But if you have a high score and you want to keep it that way, go for the former. Settling your debts will involve defaulting on your payments and that can ruin your score.

If you also have mostly secured loans, you cannot use debt settlement to solve them. It can only work on credit card debt, personal loans, medical bills and other unsecured loan types. Debt consolidation loan on the other hand, can help with almost any type of debt. It can even help with student loans but you only get a few options as to where you can get financial assistance.

These are the facts that you have to consider when you are choosing between the two. Analyze your financial predicament carefully to know which option best suits your needs.