As the economy continues to struggle, an increasing number of people are finding themselves in debt. There was a time, not so long ago, when most of us saw debt as a transitory setback from which we could recover, but that is no longer the case. Today’s consumer is forced to resort to more severe tactics. The most severe of these is bankruptcy. But, no matter how awful things appear to be, you can always consider debt settlement first.
The fundamental principle behind this type of settlement is that you are informing your creditors that you are unable to pay them in full. And instead of declaring bankruptcy and leaving them with nothing, you’d like to make a payment. This amount can be lower, but the catch is that you’ll have a shorter time to pay it (one or two weeks, with 30 days being the typical largest).
Remember that the longer you wait to pay, the more you will owe. Not only will your smallest payment increase, but you’ll also be accruing extra late fees and other costs. Not to mention the fact that your debt will almost increase to the greatest workable interest rate. That, believe it or not, could be excellent news for you.
The easiest to negotiate are all these finance costs and other expenses. That’s because your creditor will be interested in recovering their principal. This, but, should only be regarded as a beginning point. If the company you owe money to is certain that you won’t be able to pay them, they could be ready to suffer a little loss rather than risk losing everything due to your bankruptcy filing.
So, how much less will you have to pay if you choose debt settlement? There is no exact amount, although somewhere between 25% and 50% is pretty normal. If you owe $5,000, you may only have to pay $2,500 to $3,750. That’s a large saving! You may be able to pay less in some circumstances, but these are uncommon (but still worth trying if your situation is desperate).
As before stated, once you have reached a settlement amount, you will only have a limited time to pay it. Another snag is that debt settlement is usually only available for unsecured debt (like credit cards). Secured debt (house, car, large-ticket things) can be taken and sold. You will still be responsible for the difference between what they get and what you owe, and they may even send you the difference.