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Discover What Debt Settlement Is And Isn't

By: Michael Redbourn Click author's name for more of his/her articles

A great many people are considering debt settlement right now, but they don't really understand what it is and how it works. This article clearly explains what's involved and why it's probably not for you. Debt settlement is stressful, ruins your credit and often doesn't work.

In general terms, debt settlement refers to a process by which you or a representative negotiates with a creditor to get any, or all of;

a) a reduced interest rate b) a lower balance or forgiveness of debt c) a reduced monthly payment

The above states what debt settlement sets out to achieve and the following describes the ins and outs of the process.

1) You will need cash to make debt settlement work, and if you don't have any then forget about debt settlement.

2) There are no payment plans available, and you will need to forward a lump sum to the creditor or his representative.

3) Settlements of debts will most often range between 25% to 70% on the dollar depending on the creditor.

4) But some credit card companies may offer as little as a 10% reduction and will simply say, "take it or leave it", and some lenders won't offer a deal at all.

5) The best time to start the debt negotiation process is when you are three to four months delinquent because many lenders won't even discuss the issue if you're current. You can therefore expect at least a couple of months of phone and letter harassment before you start the process.

6) Credit card companies and collection agencies make it difficult and frustrating to talk to somebody in authority, so expect to be kept on terminal hold for hours upon hours.

7) Creditors have little or no interest in how much you owe other lenders, and are only interested in getting the highest settlement amount that's possible. This makes the handling of multiple accounts, which you almost certainly have, very difficult and very frustrating since you'll more than likely have to go back to lenders several times in order to work out deals that will satisfy all of them.

8) Expect to be put under a ton of pressure to act fast, and to be asked countless times to wire or mail money the same day. The thinking behind this is that it will increase your stress and result in the recovery of money.

9) In spite of the pressure that you'll be put under, you will have to insist on getting any and every deal in writing before you make any payments because if you don't, you'll more than likely get demands for more money.

10) Your credit score will be very adversely affected.

Having read all of the above you're quite likely to ready to call a debt settlement company that will handle all the work, and soak up all the abuse for you, and although that are excellent agencies out there, you must be very careful.

The present economic crisis has spawned a whole host of new companies that often know less far less than is written here about debt settlement, and there are many others that are out and out rip-offs.

Never pay any debt settlement company a deposit or an upfront fee, and always check them out with the BBB (Better Business Bureau) before signing anything.

Personal experience has led me to believe that most lenders have either little or no interest in debt settlement arrangements. They'd much rather extend a little more credit, so that the borrower will keep making everlasting minimum payments and continue making unending fees.

Scores of excellent credit counseling agencies exist however, and many of the best ones will even handle debt settlement. They're inexpensive, and if you have debt problems and haven't tried one, then please do so right away.

Article Source: ABC Article Directory

About The Author: The author of this article was a film producer, and award winning film sound editor for many years. One of his primary interests is economics, and one of his websites -> Get Financial Help is for people with bad credit that need a loan. The cost of an extended list of lenders is extremely small, and anyone not getting a loan within 60 days gets a full refund.