By: Jason Kay
Submitted: 2010-01-04 11:57:34 | Word Count: 517
Debt settlement is exactly what it sounds like. When you owe a large amount of money and you begin to fall behind there will be times when some or all of your creditors will contact you to offer you a debt settlement. For example, if you owe one credit card $10,000 and your payments are behind by more than 90 days, the credit card company may offer to take $4,000 and consider the debt paid. Why would they do this?
If you look at it from the credit company’s point of view, getting a little money is better than getting nothing at all. Now they can turn you over to a collection agency, but if someone is delinquent to them then they will more than likely be delinquent to a collection agency as well. Besides that route costs the credit company money so many times it may not be worth it to chase someone who simply isn’t going to pay the agreed upon amount.
[ advertisement ]
If you have multiple credit cards and your debt is stockpiling you don’t have to wait for the credit card companies to offer you debt settlement. There are a number of debt settlement companies that will, for a fee, negotiate with your credit card companies for you on your behalf to settle your debt.
When you hire one of these companies you usually pay them an upfront fee and a monthly fee which they hold. They then attempt to negotiate a settlement with your creditors and when a settlement is reached, the money is paid out. Keep in mind that while you do pay the debt settlement company every month, your creditors are not getting paid and so you will have to deal with all the same calls from collections agents, just as before. That won’t stop until a settlement has been reached.
If you decide to go with a debt consolidation company, there are a few things you should look for:
•Accredited: Make sure the company is accredited by the Association of Settlement Companies, also known as the ASC.
•Arbitrators: Make sure the debt settlement company you consider has experienced and certified debt arbitrators.
•Guarantee: A good debt settlement company will always offer a guarantee.
•Licensed: Some states require that a debt settlement company be bonded and or licensed. Check with your state to see if this is so.
•Fees: Save yourself some money and shop around for a good price. Remember that the cheapest isn’t always the best, but neither is the most expensive. Make sure you get full disclosure from the debt settlement company you are considering on all fees that they will charge so that you are not caught off guard down the road.
One thing to keep in mind if you do decide to go the debt settlement route is that it will not reflect well on your credit and your credit score will suffer greatly. Even though your accounts will show as ‘paid’ they will not show up as ‘paid as agreed.’ This can hurt you later on if you attempt to get more credit.
Author Resource:-
Learn the credit card debt secrets the credit card companies don't want you to know at http://www.debtsecret.net.
