Debt Settlement — The Dos and Don’ts

Falling into the debt trap is easy; but coming out of it isn’t. Life can become difficult when the monthly income is not adequate enough to cover the living expenses as well as the EMIs that need to be paid on the various loans. But there is a way to get things under control and maybe even become debt-free as soon as possible – debt settlement.
Debt settlement is a method of combining all debts and turning them into one single debt. The borrower here would be making one monthly payment instead of multiple ones. Also, this one single payment would be much lower than the sum total of all monthly payments the borrower may have been making till now.
Debt settlement services are available in plenty. Some may even contact the borrowers directly via debt settlement live transfers leads, so as to enjoy a competitive edge in the market. However, before rushing into things, it is important to understand a few dos and don’ts about debt settlement.
The Dos
To check with the credit counselor
There are many consumer credit counseling agencies that offer the first session of credit counseling, absolutely free. All that a borrower needs to do, is sit with the counselor for an hour or so and go over his finances. At the end of such a session, the borrower will probably have a fixed budget and a debt management plan (DMP) created by the counselor. The main aim of a DMP is to help the borrower become debt-free. This might take anywhere between three and five years depending upon how much the borrower owes. With the introductory session being free, it makes sense for every borrower (who is interested in debt settlement) to take the advice of the credit counselor. He can later decide whether he wants to go ahead with the counseling or look for another option.
To apply for a new loan with a bank/credit union
This would actually be the best option if a loan is readily available at a low rate of interest. Such a loan can be used to pay off all the creditors and becoming free from multiple debts. The monthly payment to be made would be much lower when compared to what the borrower may be paying till now. This option can save borrowers from getting harassed by the debt collectors.
To try and settle the debts
With basic negotiating skills a borrower can convince his lenders to settle his debts for 50 or even 60 percent less than what he owes. There are high chances that the lenders might agree if the borrower has defaulted on his payments for six months. This method is not exactly debt settlement; but with the right kind of approach, it can help in getting debts under control and pay them off.
To hire a debt settlement company
Negotiation is not everyone’s cup of tea. Hiring a debt settlement company would be a wise move to make if a particular borrower is not confident about his negotiation skills or if he doesn’t have the required cash to settle his debts. Debt settlement companies, including the ones that contact borrowers through debt settlement live transfers leads, will have experienced debt counselors who would be experts in negotiating with all kinds of lenders. They will settle all debts and leave the borrower with just one single monthly payment. This option can help a borrower in being debt-free at the earliest.
The Don’ts
Not to be scammed
There are many scam artists who pose as debt settlement agencies. They end up looting many innocent borrowers who may be in a hurry to become free of their debts. These agencies offer loans, collect payments but do not do anything about settling the debts. By the time borrowers realize this, they would have lost quite a bit of money. With the money paid to the scam artists gone down the drain, the borrowers will be even deeper into debts. Therefore, it is important to check out the credentials before saying ‘Yes’ to any debt settlement agency that might come via debt settlement live transfers leads.
Not to go for a secured debt settlement option
There are secured debt settlement loans where in the borrowers can obtain loans by offering any of their assets as collateral. In most cases it will be their homes that the borrowers need to offer. Not only would such an option put their homes at risk, it would also make them go deeper into debt (since these loans are usually for seven or more years). Getting an unsecured loan would be better here since it will only take about five years or less than that to become debt-free. Also, this would mean the borrower will not have to put his house at risk.
Not to apply for debt settlement if there is no cash available
Debt settlements may reduce the amount that need to be paid against debts; but they do require some kind of payment. For instance, a $5000 debt may be settled for $2500. Still the borrower will need to have $2500 in cash so as to pay the lender off. So debt settlement is not an option for those borrowers who have no cash to pay back their debts. This goes for even those borrowers who have been six months behind in making their payments.
Not to fall for the big promises
Many debt settlement companies, who come via debt settlement live transfers leads, tend to make huge promises. Some of these may offer freedom from debts in just a few months upon the payment of some upfront fees. However, no honest debt settlement company would ever charge any such upfront fees. Until the company settles all the debts and presents a debt payment plan, nothing would ever be charged to the borrower. Therefore it becomes very important for borrowers to watch out for such red flags while choosing debt settlement companies.
Debt settlement is definitely an excellent option for those who want to get rid of their multiple debts in the fastest way. Keeping the above points in mind can help borrowers in taking the right decisions with respect to settling their debts.