What is Debt Settlement?
A debt settlement is a manner of settling your debts by means of a third party. A professional debt settlement company will talk to your creditors and settle your debt so that you get to pay a single monthly payment at a lower rate of interest. Unlike the debt consolidation loan, debt settlement is complicated. You owe your original creditor the same amount of cash but you are now paying less. You end up paying the company for their settlement services.
How debt settlement works
Debt settlement is actually a professional service of negotiation. You contact a settlement firm which collects all your debt information. The company calls the various creditors and starts negotiating a reduced monthly payment at lower interest rates. You, however still are paying the high monthly payment. This is going into the company account as payment for their services. Once their fee payment is over, your money goes into an account opened by the company in your name. Once the amount reaches the original debt amount, you stop paying and the company distributes the amount to the respective lenders in accordance with the negotiated monthly payments.
The debt settlement system is quite beneficial as it affords you the opportunity to remain financially afloat even when sunken in debt. You get to purchase monthly necessities and comforts even during months of debt payment. The settlement system works faster and more efficiently as now the debt repayment is handled by a professional third party.
There are many debt settlement companies advertising their services. But keep in mind that just because you are deep in debt and desperately looking for a solution, you should not go in for a fraudulent debt settlement company. Be knowledgeable about how a debt settlement company works for you – how debt settlement is better than debt consolidation and debt management. Shop around and always go in for that settlement firm which offers a reasonable estimate of the service expenses. Be sure not to get saddled with a debt settlement company which charges outrageous fees.
Untangling the financial mess
When going in for debt settlement, always prioritize your debts. Make sure to tell the debt settlement company to settle your priority debts first and then settle the non-priority ones. Make sure that your debt settlement company works to pay off all your debts quickly and efficiently. Keep regular tabs on the company.
Hiring a debt settlement company can be risky. You must always go in for a company which has a solid reputation.