Review of Debt Reduction and Debt Settlement Methods
There are two basic ways to relieve your debt. Debt Reduction or Debt Settlement, Debt Reduction involves making a payment plan to bring the amount in arrears up to date. With this option creditors may be willing to negotiate low or no interest to allow you to pay off the entire debt over several years. Debt Settlement is when you negotiate with the creditor to settle on your debt, by allowing you to make one lump sum payment (and in some cases several payments) to settle the debt for less than you owe. Debt Reduction is usually a more favorable option to your credit than Debt Settlement, as a creditor always prefers to get the full amount owed, even if it's late.
Here is a description of both options and how to organize them:
Debt Reduction means you set up a payment plan to get your payments back on track and current. This means that you can no longer meet your current payment obligations that you have set forth, and you need to change them to fit your current life situation. This means that you will have lower payments and a longer time to pay it off. Arranging a payment schedule for this is important as it will stop any legal or collection action. In order to make this a reality, you will need to write a letter to a creditor explaining your situation and why you require a new payment arrangement. A creditor may not be satisfied with your first request, but will respond to you and eventually you will find yourself agreeing on the arrangement.
Debt Settlement means that you agree to pay your creditor a lump cash payment in order to settle your debts for less than you owe. This will not have the most possible effect on your credit, as you will not have paid the loan or credit card in the manner and for the amount that you agree it. This option is more preferable to a lender than bankruptcy where a creditor will receive nothing; you will need to have cash to make one payment to the lender. When settling with a lender, you will need to make sure that they respond in writing, so that they cannot sue you for damages after you have settled the debt for less than what is owed.
The decision to choose can be difficult, but it is important to be realistic, after you have determined how much you have to spare to make debt payments, make a decision between Debt Reduction and Debt Settlement based on what you can realistically afford and what will bring you out of financial dire straits.
Ian Stanton
Director of Marketing
B-EZ Enterprises
(480) 278-3717
email media@2settlemydebt.com
website http://www.2settlemydebt.com
Sunday, May 1, 2011
Thursday, February 17, 2011
Self Help Debt Settlement - Steps to Help You Negotiate Your Own Debt (Part 6)
One by One: Dealing with each creditor one by one
Okay, you know where you're at. You know what you can do. Now, it's time to start the process of negating with each creditor. If you have done your budget correctly, you will have a pretty good idea where to start.
Write a letter to the creditor
Write a hardship letter to the creditor, you will need to make sure all the information is correct. Include your account number, amount owed, and your correct contact information. The letter should include why your account has fallen behind, how your situation has changed. Be sure to also indicate the correct method that the creditor must communicate with you, as they are legally obligated to do so. Finally, it is important that you maintain a correct attitude when communicating with your creditors; you do owe them money after all.
File all communication
Not all creditors are created equal and some will want their money sooner than others. It is vital that you assemble a file for each creditor. You will need to include all correspondence that has been exchanged between yourself and the creditor. If there is ever a discrepancy between what you have said and what the creditor has said and legal action is taken, an organized file will become your best friend. Another reason this is important is when dealing through this process you may find that a lot of money is owed and it is important that you are able to remember and recall which creditors you are working with, so you don't become subject to judgments or wage garnishments as a result of you forgetting about a creditor that still needs to be paid.
Perhaps, the most important thing in preparing a plan is that you will minimize your problems. Dealing with creditors can be difficult and it can seem very overwhelming, once you are able to deal with each creditor one by one, you will find that solving and catching up on your debts is not as unattainable as it once looked like. More than that the process of reestablishing your credit will become easier and you will be more successful in having a stronger credit score sooner.
Ian Stanton
Director of Marketing
B-EZ Enterprises
(480) 278-3717
email media@2settlemydebt.com
website http://www.2settlemydebt.com
Okay, you know where you're at. You know what you can do. Now, it's time to start the process of negating with each creditor. If you have done your budget correctly, you will have a pretty good idea where to start.
Write a letter to the creditor
Write a hardship letter to the creditor, you will need to make sure all the information is correct. Include your account number, amount owed, and your correct contact information. The letter should include why your account has fallen behind, how your situation has changed. Be sure to also indicate the correct method that the creditor must communicate with you, as they are legally obligated to do so. Finally, it is important that you maintain a correct attitude when communicating with your creditors; you do owe them money after all.
File all communication
Not all creditors are created equal and some will want their money sooner than others. It is vital that you assemble a file for each creditor. You will need to include all correspondence that has been exchanged between yourself and the creditor. If there is ever a discrepancy between what you have said and what the creditor has said and legal action is taken, an organized file will become your best friend. Another reason this is important is when dealing through this process you may find that a lot of money is owed and it is important that you are able to remember and recall which creditors you are working with, so you don't become subject to judgments or wage garnishments as a result of you forgetting about a creditor that still needs to be paid.
Perhaps, the most important thing in preparing a plan is that you will minimize your problems. Dealing with creditors can be difficult and it can seem very overwhelming, once you are able to deal with each creditor one by one, you will find that solving and catching up on your debts is not as unattainable as it once looked like. More than that the process of reestablishing your credit will become easier and you will be more successful in having a stronger credit score sooner.
Ian Stanton
Director of Marketing
B-EZ Enterprises
(480) 278-3717
email media@2settlemydebt.com
website http://www.2settlemydebt.com
Thursday, January 20, 2011
Self Help Debt Settlement - Steps to Help You Negotiate Your Own Debt (Part 5)
Debt Settlement or Debt Reduction; what is your best choice?
After you have went through you budget, you will be able to know how much money you have left on a monthly basis to contribute towards your debt load. The question you must then consider is if you should work towards a debt settlement plan that will involve having you outstanding debt settled, or a debt reduction plan that involves working with your creditors to execute plan that reduces your interest and fees and allows you to repay what you currently owe. There are advantages and disadvantages to both programs.
Debt Settlement Plan
Pros:
A debt settlement plan allows you to pay back only a portion that is owed to your lender. An example being if you owe $10,000 a lender will settle with you for a cash payment of $5000.00 or $6000.00, this enables you to resolve your debt with your creditor(s).
Cons:
Having your debt settled could have an adverse effect on your credit. It is likely that you will be unable to get credit from any company that you have settled debt with. Another negative is that when you settle debt you must pay off the debt in one lump payment (the faster you pay the more you could save). This may not be possible if you are struggling financially.
Debt Reduction Plan
Pros:
A debt payment plan involves arranging a payment plan that is different from your regular payment plan that was originally required when you started with the creditor. This system has the most positive effect on your credit as the creditor is still able to recover all the money that is owed them. There is also a possibility of being able to have your interest reduced (sometimes to zero percent), so that you will be able to have more of your payment go towards principal rather than interest
Cons:
If you are carrying too much debt, working out a payment plan that involves continuing to pay on the debt that is owed may not offer much relief. Also, even though this is a more positive option that debt reduction in relation to your credit it could still negatively affect your credit.
So, which of these options should you choose? This really depends upon your current income and debt responsibilities. Certainly, choosing to pay back all the debt with a modified payment option is the most favorable one for your credit, and the one the lender prefers. For example if you currently owe $20000.00 in credit card debt with an average interest rate of 24.99 percent your monthly interest is about $500.00 per month. If you negotiate a five (5) year repayment plan your payments would be about $650.00 per month. By reducing your interest rate to an average of 10 percent this would reduce your interest to about $167.00 per month. If you negotiate a five (5) year repayment plan your payments would be about $425.00 per month. Now imagine if you could negotiate a zero percent interest rate with your creditor(s).
In stating the above, it's important to be realistic, if you are not making any headway now in catching up, working out a payment plan could just continue to bring you hardship. This must be considered. The most important thing to remember is that the debt reduction plan must work for you and your budget. If you choose an option that continues to keep you "tied up" you will run into the same issues.
Ian Stanton
Director of Marketing
B-EZ Enterprises
(480) 278-3717
email media@2settlemydebt.com
website http://www.2settlemydebt.com
After you have went through you budget, you will be able to know how much money you have left on a monthly basis to contribute towards your debt load. The question you must then consider is if you should work towards a debt settlement plan that will involve having you outstanding debt settled, or a debt reduction plan that involves working with your creditors to execute plan that reduces your interest and fees and allows you to repay what you currently owe. There are advantages and disadvantages to both programs.
Debt Settlement Plan
Pros:
A debt settlement plan allows you to pay back only a portion that is owed to your lender. An example being if you owe $10,000 a lender will settle with you for a cash payment of $5000.00 or $6000.00, this enables you to resolve your debt with your creditor(s).
Cons:
Having your debt settled could have an adverse effect on your credit. It is likely that you will be unable to get credit from any company that you have settled debt with. Another negative is that when you settle debt you must pay off the debt in one lump payment (the faster you pay the more you could save). This may not be possible if you are struggling financially.
Debt Reduction Plan
Pros:
A debt payment plan involves arranging a payment plan that is different from your regular payment plan that was originally required when you started with the creditor. This system has the most positive effect on your credit as the creditor is still able to recover all the money that is owed them. There is also a possibility of being able to have your interest reduced (sometimes to zero percent), so that you will be able to have more of your payment go towards principal rather than interest
Cons:
If you are carrying too much debt, working out a payment plan that involves continuing to pay on the debt that is owed may not offer much relief. Also, even though this is a more positive option that debt reduction in relation to your credit it could still negatively affect your credit.
So, which of these options should you choose? This really depends upon your current income and debt responsibilities. Certainly, choosing to pay back all the debt with a modified payment option is the most favorable one for your credit, and the one the lender prefers. For example if you currently owe $20000.00 in credit card debt with an average interest rate of 24.99 percent your monthly interest is about $500.00 per month. If you negotiate a five (5) year repayment plan your payments would be about $650.00 per month. By reducing your interest rate to an average of 10 percent this would reduce your interest to about $167.00 per month. If you negotiate a five (5) year repayment plan your payments would be about $425.00 per month. Now imagine if you could negotiate a zero percent interest rate with your creditor(s).
In stating the above, it's important to be realistic, if you are not making any headway now in catching up, working out a payment plan could just continue to bring you hardship. This must be considered. The most important thing to remember is that the debt reduction plan must work for you and your budget. If you choose an option that continues to keep you "tied up" you will run into the same issues.
Ian Stanton
Director of Marketing
B-EZ Enterprises
(480) 278-3717
email media@2settlemydebt.com
website http://www.2settlemydebt.com
Subscribe to:
Posts (Atom)
