Debt Settlement Company FAQ
http://creditfederal.com/article/articles/419/1/Debt-Settlement-Company-FAQ
By CreditFederal.com - A good or bad credit personal loan, auto and mortgage financing, and credit card resource.
Published on 12/27/2007
Can a debt settlement company really lower your debt so you can pay off in a few years?
Yes, a debt settlement company can lower your debt for fast payoff
Before we discuss this option, let's first review some other ways to reduce debt and/or to lower monthly payments.
One method is by obtaining a loan to payoff higher interest credit such as credit cards. Typically consumers do this via mortgage refinancing. Nonhomeowners; however, may want to consider auto refinancing. Although auto refinancing has a higher interest rate than a mortgage equity loan, it nonetheless is often much cheaper in the long run than continuing to pay high credit card interest charges. Sometimes people need only temporary relief to pay a bill, such as an emergency loan. If they can repay the loan within two weeks, they may want to consider a payday cash loan. The key to this option is to repay that loan immediately.
Another method of controlling debt is to get credit counseling which helps you develop a sensible plan for repaying your debt. Although this option doesn't get you out of debt fast by eliminating a portion of the balance like debt settlement offers, it has less impact on your credit score.
If you are desperate to get out of debt, simply cannot make payments, cannot arrange a repayment plan with your creditor(s), etc, only then should you consider a debt settlement company. A debt settlement company will negotiate with your creditor(s) to reduce the amount of principal and interest due. Another term commonly used for this is 'chargeoff'. For example, if you owe a credit card company $20,000, the debt settlement company may be able to reduce that down to $5,000. Unfortunately, the credit card company will report the settlement to the credit bureaus, which will most likely adversely impact your credit score. As you may already know, a bad credit score can cost you your job if your employer requires a good score. It can also raise interest rates you pay on other lines of credit, including auto and home loans even if you pay those timely because you may be considered as a high risk.
Before you cutup your credit cards and stop answering your phone, we recommend you work diligently with your creditors to repay your debt and not to simply stop paying or to negotiate a settlement payoff. If you choose debt settlement, you can avoid their fees by doing the work yourself if you are good at negotiating. View a sample debt settlement letter.
Whichever option you choose, don't forget to also take steps to rebuild your credit rating. Of course this means paying bills on time. And it matters. If you have a bad credit score you'll face higher cost loans, more expensive insurance, and could lose that promotion. Automate as much of your bill paying online as possible. That will help keep you from missing payments.
If you can't cover your monthly bills without using lines of credit (such as credit cards), tighten your budget.
Examine your credit reports to make sure that your credit score isn't suffering from bad information.
Check the account numbers. Are they yours? Are you identified correctly? If the information is incorrect, you can contest it by writing the credit rating agency directly.
One method is by obtaining a loan to payoff higher interest credit such as credit cards. Typically consumers do this via mortgage refinancing. Nonhomeowners; however, may want to consider auto refinancing. Although auto refinancing has a higher interest rate than a mortgage equity loan, it nonetheless is often much cheaper in the long run than continuing to pay high credit card interest charges. Sometimes people need only temporary relief to pay a bill, such as an emergency loan. If they can repay the loan within two weeks, they may want to consider a payday cash loan. The key to this option is to repay that loan immediately.
Another method of controlling debt is to get credit counseling which helps you develop a sensible plan for repaying your debt. Although this option doesn't get you out of debt fast by eliminating a portion of the balance like debt settlement offers, it has less impact on your credit score.
If you are desperate to get out of debt, simply cannot make payments, cannot arrange a repayment plan with your creditor(s), etc, only then should you consider a debt settlement company. A debt settlement company will negotiate with your creditor(s) to reduce the amount of principal and interest due. Another term commonly used for this is 'chargeoff'. For example, if you owe a credit card company $20,000, the debt settlement company may be able to reduce that down to $5,000. Unfortunately, the credit card company will report the settlement to the credit bureaus, which will most likely adversely impact your credit score. As you may already know, a bad credit score can cost you your job if your employer requires a good score. It can also raise interest rates you pay on other lines of credit, including auto and home loans even if you pay those timely because you may be considered as a high risk.
Before you cutup your credit cards and stop answering your phone, we recommend you work diligently with your creditors to repay your debt and not to simply stop paying or to negotiate a settlement payoff. If you choose debt settlement, you can avoid their fees by doing the work yourself if you are good at negotiating. View a sample debt settlement letter.
Whichever option you choose, don't forget to also take steps to rebuild your credit rating. Of course this means paying bills on time. And it matters. If you have a bad credit score you'll face higher cost loans, more expensive insurance, and could lose that promotion. Automate as much of your bill paying online as possible. That will help keep you from missing payments.
If you can't cover your monthly bills without using lines of credit (such as credit cards), tighten your budget.
Examine your credit reports to make sure that your credit score isn't suffering from bad information.
Check the account numbers. Are they yours? Are you identified correctly? If the information is incorrect, you can contest it by writing the credit rating agency directly.