Debt settlement refers to a strategy that allows individuals to handle various forms of debt through a single monthly payment. A company specializing in debt settlement, also known as a debt relief company, can negotiate your debts to secure more favorable monthly payments and interest rates. They might even be able to reduce some of your existing debt balances. You then make a single payment to your debt relief company, which is distributed among all your debts.
These debt relief service providers usually charge a service fee. It's important to steer clear of exploitative companies that offer unrealistic promises and instead choose reputable agencies that operate legitimately.
Living under the burden of debt can be highly stressful. However, there are services available that can assist you in managing and consolidating your debt. Once you're aware of your credit score and have a complete understanding of your debt, you can begin to address it.
While your ultimate aim is likely to be debt-free, depending on your circumstances, it might be more practical to start on a smaller scale. Concentrate on maintaining regular payments and adhering to your plan. Debt relief professionals, whether they're certified credit counselors or debt settlement companies, can guide you on your journey.
If you're finding it hard to manage your debt, there are other solutions besides debt settlement. It's important to weigh the advantages and disadvantages of each debt relief method before choosing the most suitable one for your financial circumstances.
Certified credit advisors, also known as debt advisors, typically work for nonprofit entities and can assist you with debt control, budget planning, and other financial management techniques. They can also help set up debt management strategies to reduce your debts: usually, you would make regular payments to the credit guidance agency and they would pay your creditors on your behalf. Unlike debt settlement schemes, they don't negotiate the debt amount but might help alter your repayment conditions.
To locate a trustworthy, certified credit advisor, you can start your search with the National Foundation for Credit Counseling (NFCC).
Although it might seem counterproductive, obtaining an extra loan to merge your debt into one payment could help decrease your total debt load, depending on the conditions you can secure from lenders. For instance, if you have high-interest credit card debt but maintain a good credit rating, getting a personal loan for debt consolidation could enable you to clear the credit cards and make a single monthly loan payment, ideally with a lower APR.
Bankruptcy can be a final option to eliminate your debt, but it significantly impacts your credit rating and creditors might still be able to claim some of your assets.
Chapter 7 bankruptcy involves the sale of nonexempt assets, even though you'll discharge unsecured debt; Chapter 13 bankruptcy helps establish a payment plan (meaning you'll still need to pay off some debts) but might protect you from foreclosure, in certain situations. It's recommended to consult with a bankruptcy lawyer to determine if bankruptcy is the right move for you.
