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With the easy availability of credit, many consumers find themselves in an enormous amount of debt during these hard financial times. While they may have been able to make do by making minimum payments each month, they often become behind in payments and face repeated collection calls and demands for payment. For consumers that need debt settlement, a basic debt settlement guide can help them decide which is the best route to go to settling their debt and getting them back on the path of solvency.
The first thing this debt settlement guide will discuss is the availability of debt settlement companies. Debt settlement companies will negotiate with creditors for a fee which will allow the consumer to pay off the debt in a lump sum payment that is acceptable to the creditor. Oftentimes, the debt settlement company can get the debt reduced to 20%-50% of the original debt, making a lump sum payment possible. A debt settlement company can help buy time for the consumer when the consumer needs to save up for the lump sum payment. The debt settlement company will charge a monthly fee that is usually based on the percentage of the debt settlement. They can put a stop to collection calls and letters and help consumers meet their financial responsibilities.
There is a slightly different approach to debt settlement that should be discussed in this debt settlement guide. Debt negotiation companies differ from debt settlement companies. They work with consumers who do not have the cash available to make lump sum payments as they would with a debt settlement company. They set up a trust savings account for consumers where consumers make monthly payments which are deposited in a savings account. They charge a monthly fee to maintain the account. Once there is enough money in the account to negotiate for a debt settlement, they will contact creditors and arrange for a lump sum payment. The main difference between debt negotiation and debt settlement is that with debt negotiation, your creditors are not aware of your arrangements with the debt negotiation company and you still may get collection calls and letters.
No debt settlement guide would be complete without a discussion of consumer credit counseling services. These services work directly with consumers and creditors. They help consumers draw up a monthly budget and negotiate with creditors for a low monthly fee that the consumer can afford. The consumer pays the fees directly to the consumer credit counseling agency that in turn pays the creditor. This may be a good option for people who do not have the resources to make a lump sum settlement and want to make affordable monthly payments based on their income and budget needs.