Is Debt Negotiation for You? – Debt Settlement Advice

Debt negotiation is a relatively new form of debt relief that is gaining popularity for its results in reducing credit card and consumer debt and because the process can also help homeowners avoid foreclosure by making home loan modifications more likely to be approved. There are two schools of thought on the subject; one that focuses on broken settlements, credit scores and direct negotiations while the other centers on the short and long term benefits of the practice. First, the arguments against debt negotiations:

* Broken settlements – A settlement can be broken by either the party executing the negotiation or the customer. True, there have been instances were companies didn’t follow through on their promises to see the negotiation from beginning to end. The percentage of customers involved in those situations has been small and could have been prevented with some due diligence. Many companies have been drawn into the debt relief industry by the sheer numbers of borrowers and their escalating debt starting in the late 90’s. What had started as debt counseling run by a few non-profits mushroomed into an industry populated with thousands of new and inexperienced companies offering services far beyond the scope of the original mandate of assisting indebted customers with their debts Within those thousands of companies were those that didn’t deliver on debt negotiations, counseling, or consolidation.  Customers can also break a settlement by not making enough payments to settle the negotiation. Whether by circumstance or intention, some will stop making payments during the 18 to 48 months of the settlement process.  

* Credit scores – A debt negotiation will likely decrease the credit score of a borrower that enters a debt negotiation, but it depends on what that score is at the time the process starts. A vast majority of borrowers that start a debt negotiation are already behind on payments and are consequently taking hits on credit scores so the negotiation won’t have as much of an effect. The second issue on credit scores is that the negotiation stays on the report for up to seven years. While that can be true, doing nothing will leave charge-offs and open balances on the report indefinitely. Finalized, settled, and closed accounts are ultimately a much better reflection on a credit report than accounts that appear intended and/or neglected.

* Direct negotiation – Borrowers can initiate direct negotiations and, in fact, may be contacted by their lenders to do so. One problem with going direct is that there are normally several accounts to be negotiated, all of which will need to be done independently. A second issue is that the offers in direct negotiations are usually for lump sums or for payoffs within a few months of agreement. Those types of payments are often unworkable for the borrower, especially if there is more than one lump sum agreement at a time.  

The benefits of debt negotiations are as follows:

* Immediate relief – Upon initiation of the debt negotiation, the borrower will immediately experience an approximate reduction of 50% on payment obligations for all accounts involved in the negotiation. Reductions can vary, depending on the borrower’s ability to pay. By making payments in excess of the 50% reduction the borrower may be able to pay off the negotiated balances faster.

* Debt balances cut by 40 to 60% – Depending on the creditor, balances can be negotiated down by 60% or more. For a negotiation covering multiple accounts the average reduction for the total is 50%. Once the negotiated balances have been settled the accounts are considered to be paid in full with no further obligation by the borrower to the lender.

* A wide spectrum of accounts which can be negotiated – A debt negotiation can include credit cards, signature loans, department store debt, unpaid medical bills, unpaid utility bills, and more. This effectively gives the borrower a chance to wipe the slate clean without the disadvantages of filing bankruptcy.

* Paying off all debts within four years – As credit card balances have accumulated for consumers over time, making payments that materially reduce the principle balance has become difficult, if not impossible. For those that can only afford to make minimum payments, a full payoff could take twenty five years or more. Calculated out over that time a borrower would pay many times the actual balance in interest alone. Contrast that scenario with a full payoff of debts over four years or less at approximately half the balance amount and the merits of debt negotiation become very apparent.

* Increased odds of approval for home loan modifications – A debt settlement can enhance an application for a home loan modification by showing a reduction of consumer debt payments which allows for a greater availability of a homeowner’s income toward mortgage payments. In fact, a debt negotiation could be the difference between a successful loan modification and foreclosure.

You will continue to hear pro and con arguments regarding debt negotiations. One thing to keep in mind is that credit counselors have been and still are backed by credit card issuers. When listening or hearing about debt negotiations, always consider the source. If you are contemplating a debt negotiation, be sure to conduct some due diligence before selecting a firm to act on your behalf. Visit the firm and ask enough questions to get comfortable with the partnership. Insist on a law firm experienced in debt negotiations and, if applicable, home loan modifications. Getting back on your feet will take partnering with the right firm and a commitment to seeing the process through to its completion. Take care of those issues, and you’re on your way to financial freedom.

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Home Debt Relief Help – Advice On Debt Relief To Get Rid Of Debt In The Home

Consumer debt in the home can put all sorts of stresses and strains on families, so finding an effective form of debt relief is very important.  The first step towards getting rid of serious debt is to face up to the problem and seek help to resolve it.  In this article I will provide information on the main home debt relief options available, so that you can make an informed decision about what you need to do next.

There are various routes available to you when you need help and advice on getting rid of debt, but you need to understand how these work so that you can select the best option for your own circumstances.  You also need to be aware that there are hundreds of commercial companies who will offer you various forms of help, but some unscrupulous organisations will simply try to sign you up for schemes that make them money without properly dealing with your problem.  Without the right information it is easy to take the wrong track when seeking debt relief help.

The first thing worth knowing is that borrowing more money is not likely to be the most effective form of home debt relief help, unless you are in very particular circumstances.  By taking out a new loan, you are simply transferring your debt elsewhere, and could well be making it last much longer and paying more back in the long run.  This is only likely to be a sensible move if your debts are not large, and the interest rates you are paying are especially high.

The main system that is used successfully by thousands of people each year is debt management.  This is where a debt company will set up a debt management plan for you, which means your debts are consolidated into a single payment, which you make to the company, who then pass it on to creditors.  This works because the debt management company negotiate with your creditors to set up new arrangements for repaying your outstanding debt.  This is likely to mean that interest charges are reduced and terms altered to make the repayment more affordable.  Using such a plan, you repay everything you owe over a set period of time, in single affordable payments.

For a debt management plan to be possible, you need an income that leaves you enough spare every month to pay the regular amount into the plan.  If your debts are very high and you do not have much spare income, you may need to look at an alternative form of home debt relief help called debt settlement.  This process also involves using a specialist debt company to negotiate large reductions on your debts.  Whereas you repay all you owe with debt management, you only repay a portion of your debts with debt settlement.

The time the negotiations can take will depend very much on the nature of the debts and the attitudes and procedures of each creditor.

Whichever type of home debt relief help you opt for, you need to take care when selecting a company to assist you.  The safest approach is to follow recommendations for reputable and well established companies.  Once you have a few that you know to have good track records of success, you should apply to two or more of them so that you can make a comparison between their recommendations and offers.

Question by stacys mom: Is there any place to get FREE credit repair advice?
I don’t need someone to DO anything for me, just give me advice on what ~I~ can do to improve my credit (ie: should I file bankruptcy?) My credit report is NOT inaccurate, it’s just bad!
OK, maybe I used the incorrect term in credit “repair”, as I said, my credit report is NOT inaccurate. I am looking for advice on how to “rebuild” my credit.

Best answer:

Answer by SuperCactus
Go to www.ezinearticle.com and do a search for credit repair. You will find dozens of articles with lots of good advice.

Know better? Leave your own answer in the comments!

Debt Relief Advice – Tips For Finding Honest And Reliable Debt Relief Counseling

The global meltdown has had a very negative impact on almost all the people. Many people have seen their income dwindled and being pushed into the vicious cycle of debts, from where they are finding it difficult to emerge. They have started contemplating various options like declaring themselves bankrupt, debt settlement or debt consolidation. The easiest option that many thought of was to declare themselves as bankrupt and get rid of all dues. But the changes in Federal Policies have made this as a very unattractive proposition. Hence, there is a scramble for debt relief advice.

Because of the surge of many debt ridden consumers opting for debt settlements and seeking debt relief advice, there has been a surge in the number of companies that offer their services for negotiating with the creditors. This mushrooming of companies has led many a fraud companies to enter the market and fleece the already burdened consumer and landing him into more trouble.

But then the question arises is how to find honest and reliable debt relief counselor?

Well do not panic. Here are some of the tips for finding honest and reliable debt relief counseling.

Remember that you can find a debt relief counselor through various ways like Internet, newspapers or even through direct or indirect contacts. But before you choose your negotiator, there are some things that you have to look out for that could determine whether that company is genuine, honest or fraud. Your counselor or negotiator should be able to fulfill all the below mentioned regulations and criteria like:

It should be a member or have accreditation to any debt relief network, Chamber of Commerce or the Better Business Bureau.

All the above mentioned associations have set guidelines that any company or counselor seeking accreditation has to fulfill and then sustain their benchmarks. This is of utmost importance as it would help you to broadly eliminate some of the negotiators as there are high chances of them to be fraud.

If you are seeking an online company then read their claims properly. Many a times they claim moon, but eventually they turn out to be false claims. Also read their reviews and customer ratings and satisfaction. Cross check their claims, details and customer satisfaction through other websites like the relief network etc.
The company should never ask for any upfront money whole or even in part. If it does so then it could be fraud. According to the Federal Laws, the company can ask for money only after it has successfully negotiated and settled your dues with the creditors to your advantage.
There are many other safeguards that are designed to protect you as a consumer.
Even the Government is helping you by setting up its own debt relief network, where the counselor works on either non-profit basis or even gives free services.

These counselors are very reliable as they are appointed by the Government.

Well these were the basic tips that you have to follow to find an honest counselor for your debt relief advice.

Debt settlement is a viable option to filing bankruptcy and is becoming increasingly popular amongst Americans with over k in unsecured debt. Creditors are ready to negotiate. You can literally eliminate 50% of your unsecured debt with a settlement. Check out the following link to locate legitimate debt help in your state.

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