All You Need To Know About Debt Settlement Programs

Sunday, April 12, 2009

Many consumers swimming along happily in a sea of credit suddenly find themselves drowning in a quagmire of debt. According to a 1992 Federal Reserve study, 43 percent of U.S. families spend more than they earn and, according to Cardweb.com, almost one out of every 100 American households will file for bankruptcy during their lifetime.

What should you do if you are one of these consumers? You could take advantage of one of the many services available to you, such as debt settlement programs. You can have your financial freedom back again.

What Are Debt Settlement Programs?

For years, debt settlement has been a popular method for thousands of consumers to regain financial wellness. Debt settlement means that, with the help of a settlement negotiator, you work out an agreement with creditors to settle your delinquent payments or unpaid balances.

If you are behind on payments on a high interest loan, for example, it could take you as long as 20 years to pay your debt. Debt settlement programs can help shrink your payment terms and amounts, and they can also provide you with the following benefits:

A Current Credit
ReportWhen you sign up for, and begin, a debt settlement program, many creditors will “re-age” your account, or bring it to a current status.

Lowered Interest and Monthly Payments
Depending on your debt settlement program, your settlement negotiator can help reduce the interest payments and monthly payments on your outstanding loans.

A Reduction in Creditor Calls
Creditors call consumers regularly if they are behind on their payments or not making payments at all. Negotiators can work with creditors to eliminate this practice once you are enrolled in a program.

In addition to these benefits, debt settlement programs can also assign you a credit counselor. Besides playing an active role in your settlement, these counselors can also provide you with financial tools to teach you how to maintain a healthy spending practice.

What Types Of Debt Are Eligible?

While debt settlements can be performed on almost every type of debt, most settlement cases involve revolving credit, or credit cards. Why? It’s because credit card debt is one of the easiest and fastest types of debt to acquire. According to the Federal Reserve, Americans made $1.1 trillion worth of credit card purchases in 1999. In addition, consumers in the U.S. carry on average $5,800 in credit card debt from month to month. Based on this information, the Federal Reserve reports that if only the minimum monthly payment was made on this debt, it would take more than 30 years to pay it off. This debt would also include an additional $15,000 in interest.

However, remember that debt settlement programs are not just limited to credit cards. There are many debt settlement programs available that can address your wide-ranging needs.

Are Debt Settlement Programs Right For You?

Debt settlement programs can be ideal for people with a good credit history who have been making consistent payments, no matter how small, on their debts. If, however, your credit history shows that you are behind on your credit payments, or that you have significant “charge-offs” noted on your account history, you might not be able to participate in a debt settlement program.

Unfortunately, many people don’t think about healing their debt problems until they decide to make a big purchase, like buy a new home. Being proactive with your financial situation in advance and seeking advice from a credit counselor can help you get back on the financial well-being track before it’s too late.

Here are a few tips to keep in mind as you enroll in your debt settlement program:

Outcomes Are Different For Everyone
Not everyone has the same experience in a debt settlement program. For example, some people are fortunate to have their debt reduced down to 75 percent of their original payment, while others may only experience a 50 percent reduction.

Seek Negotiating Advice from a Debt Settlement
Firm If haggling and hardball negotiation is not your thing, there are several debt settlement firms that can provide you with settlement expertise.

Be Patient
Even though debt settlement programs can put you on the fast track to debt freedom, in some cases, paying off creditors can still take up anywhere from two to four years.

Look forward to the future
Stay focused and remember that the right debt settlement plan can lift you out of the quagmire and have you plain sailing again in no time!