Debt Settlement: How To Find Financial Freedom in Dumfries, Virginia
The monthly payment can be the biggest burden in your life, especially if you’re struggling to make ends meet or digging yourself deeper into debt with each passing month. If you’re finding yourself in this position, it might be time to consider debt settlement as an option to find financial freedom without bankruptcy. Read on to learn more about how debt settlement works and how it can help you overcome your debt problems quickly and easily!
How Much Money Will I Save With Debt Settlement?
Debt settlement services are really popular in this day and age because of the economic downturn. But can debt settlement really save you money? The answer is yes, it can. Debt relief is really a much better option than bankruptcy these days because bankruptcy is not viewed as positively as it used to be.
With debt settlement, you are less likely to ruin your chance of getting approved for future loans or credit cards; bankruptcy can even cause you to miss out on job opportunities. If you are successful with a debt settlement, it can reduce your overall debt owed in half. This will drastically lower your monthly payments.
You will often be provided with several repayment periods to choose from, between 6-months, to several years. The shorter the repayment period, the higher your monthly payment will be, but the sooner you are fully debt free. The longer periods offer a lower monthly payment, which looks nice, but it takes longer to be debt free, and you’ll pay more on interest.
To save the most money with a debt settlement program, you should be settling multiple debts and accept the shortest repayment period you can afford.
What Are The Benefits of Debt Settlement?
Debt settlement is not a way to cheat the creditors you owe but the last measure to avoid bankruptcy, which is often bad for both creditors and consumers. If you are unable to pay your bills on time, you’re only getting further into debt. Creditors are adding late fee after late fee, interest continues to increase, and your minimum payments only get higher. If you couldn’t afford your minimums before this, chances are you won’t be able to afford them after the prices go up.
Settling your debt allows you to get your debt lowered to a more manageable amount to dig yourself out. Creditors often accept a lower amount for several reasons. The biggest is they know bankruptcy being the only choice left could leave them with a total loss. The second is the creditors can write off the loss, and finally, if you have been repaying a while, they may have made their money back from interest anyway.
Repayment Periods Can Be Reduced By Debt Settlement Plans
Instead of struggling to make your minimum payments each month and taking years or decades to get it fully paid, you can be out of debt in 2-3 years on average. Some people can manage to get out of debt in just 6 months to a year depending on how much their debt was lowered.
Save Your Credit
Debt settlement will not damage your credit nearly as bad or as long as a bankruptcy. Debt settlement is not a public record, but bankruptcy is. That means anyone can easily find out if you have filed for bankruptcy. It takes a bit more than a basic subscription or search of court proceedings to learn about debt settlement. However, debt settlement does often show on your credit report when pulled by a bank, credit card company, employer, or landlord. It also doesn’t lower your credit as much as bankruptcy would.
You May Keep Your Credit Cards Open
There are situations when you may be allowed to keep credit cards open to prevent your utilization from increasing and lowering your score. You may even be able to continue using them, but it is only recommended as a backup emergency so you do not cause yourself to get further into debt again. But, it can bring peace of mind to know that if needed, they are there to help with unexpected situations such as a blown tire, medical expense, etc.
Management of Debt Becomes Much Easier
You can stop stressing over several payments each month and start focusing on yourself again. With a single payment, you know exactly how much it will be every month, when it is due, and how many payments are left.
Reduce Interest Rates Saves You Money
When you enter into a successful debt settlement plan, you’ll reduce your payment each month. That means you have more money left over. This can be used to pay off your debt quicker, or many simply put it back as a nest egg for emergencies rather than using their credit cards when things occur.
Dumfries, Virginia Debt Settlement Drawbacks
There are reasons debt settlement should not be the first choice to recover from debt. There are various drawbacks. First off, there is no guarantee that the collectors will accept a lower amount. It will also cause your credit score to go down for a while as the settlements are being negotiated. Until creditors come to an agreement, settlement can be a stressful situation as you do not know if it will be successful or if you will end up owing more in debt from interest and late fees.
Always consider which debt relief solution is best for you, and weigh the pros and cons of alternatives.
Risk of Property Loss
When you enter a debt settlement, the company will likely want assurance you will pay them. There are a couple options, but chances are, if you are in search of settlement, you won’t have a bank account with large savings to offer as a lump sum. Instead, they may request collateral in the form of personal property. This can be a car, truck, boat, or even your home, depending on how much debt you owe.
If you make your payments, you won’t lose your property. However, if you fall behind and miss payments, they could forfeit your property. Although, with bankruptcy, you often have to sell all personal property to repay debts.
Don’t Fall For Hidden Fees
If you are not careful, you could end up paying fees you were not aware of. These are often referred to as hidden fees. They can come in various forms, but they can cause you to pay more than you would have originally because of longer repayment periods and interest. That is why a shorter repayment period is ideal when possible.
The Settled Amount Could Be Taxable
Based on your circumstances and debt owed, you may want to speak with a tax professional or adviser before pursuing a debt settlement plan. It is possible, and often likely, that the IRS will consider your settled debt as taxable income once the creditor has reported it. If you do not speak to a professional beforehand, the amount you suddenly owe the IRS could be a shock, and it could cause additional issues if you cannot afford to pay the taxed amount and make your settlement payments.
What Will I Pay For a Debt Settlement Program?
On average, a debt settlement agency will charge as little as 10%. They may charge on the total debt owed when applying or based on the total settled amount. It is best to get the latter, as 10% of the settlement is often lowered than it would be for the total debt amount.
For example, if you owe $40,000 and they charge 10% of the full amount, you would pay $4,000 in service fees. However, if they get 50% settled, it would be $2,000 in fees.
The reason you want the last is not only because the fees are lower, but when the debt settlement company charges based on the settled amount, they are more likely to work hard to get the best deal possible.
How Are Debt Settlement Companies Successful?
Debt settlement companies work by providing a service as the 3rd party who takes care of contacting creditors and trying to work out a lower payoff amount. The reason they are successful in this over someone trying to do it themselves is creditors and collection agencies are used to people calling and trying to get lower payments or payoffs. They have tactics that, in most cases, trick consumers into still paying the full amount.
Debt settlement companies have agents that are familiar with these tactics and are trained on how to avoid them. Also, when creditors are contacted by a settlement company, they know consumers are serious about not being able to afford to pay and struggling enough that these giant steps are being taken. When a collector understands how close consumers are to filing for Chapter 7 or Chapter 13, they are much more willing to work something out.
That is why debt settlement is not, and never will be, recommended for anyone who has the ability to make payments or pay off debts. It is not a get out of debt fast method because it will take time to recover from, just not as long as bankruptcy would.
Largest Benefits Of Settling Debts
When it comes to the largest benefit, avoiding bankruptcy would have to be at the top of the chart. Instead of your credit history crashing and being buried under a pile of papers (bankruptcy), it is more like having a flat and getting help to get back on the road. Debt settlement is no longer visible on credit reports after 7 years. Bankruptcy, on the other hand, impacts credit for 10 years and will be viewable forever.
Finding Ideal Debt Settlement in Dumfries, Virginia
When it comes to finding a debt settlement company that you can trust, the first and most effective method is contacting your local customer protection agency or Attorney General. They have complaints on file.
You can also find online reviews and testimonials. Keep in mind positive feedback online is not always what the consumers do. For these, focus on negative reviews over positive ones.
Find a debt settlement company that offers multiple contact methods. You want to try meeting in person for the first visit and until you are entered into the plan. Afterward, you can make payments easier over the phone or online. Most businesses will offer all three options; try to find one of these.
Do not trust a business just because they have a non-profit title. This actually makes it easier for them to hide fees and charge excessively for their services. Sadly, this is a common tactic for deceptive business models.
