Unsecured debt (charge cards, unsecured cash loans and repossession deficiencies) have spiraled out of control. According to an April 2009 Nilson report, the median level of unpaid credit card debt stood at $10,679 at the end of 2008. Debt settlement services are amongst the most popular ways of tackling money problems as it is possible to become completely debt-free in less than 36 months.
Debt Settlement Service Acceptance
Consumers typically make repayments on unpaid credit card debt and unsecured cash loans or they default due to underlying affordability issues. It is important to appreciate that default is fundamental to acceptance as the lender will not agree to a debt reduction if an account is current and up-to-date. Once it has been sold to a debt collection agency, the negotiation process can now proceed.
What is a Debt Settlement Service?
Following a series of negotiations with creditors, debt settlement companies may be able to secure a reduction of up to 50% of the principal (amount owed). The remaining unsecured debt is then repaid over a 12 to 36 month period. It is important to note that the debt reduction does not take place until the final payment in case the debtor fails to keep-up with the repayment plan.
Avoid Debt Settlement Companies That Front-Load Charges
It is a simple reality that not all debt settlement services are the same. Under no circumstances should someone sign-up to a program that front-loads management charges. Whilst charging 15% of each monthly contribution for the settling of debt is normal, but never agree to pay these charges in advance as this will increase the amount owed.
Researching Debt Settlement Companies
It is important to invest sufficient time to find the best debt settlement service to negotiate unpaid credit card debt. The obvious starting point is asking friends and family if they can recommend anywhere. However, the majority of individuals check the feedback provided by the Better Business Bureau. It is possible to quickly determine the sort of relationship that is established with customers.
Debt Settlement Service Alternatives
Debt settlement companies provide an effective way to become debt-free for those who are prepared to do a little research. However, there are a number of ways to achieve the settlement of debt, including a Debt Management Plan or filing for bankruptcy. With the exception of bankruptcy, it is necessary to make a monthly repayment to creditors from any disposable income until the balance is cleared.