Understanding Debt Settlement

Understanding Debt Settlement

In this day and age, a lot of people find themselves with an overwhelming amount of debt that has accumulated over the years. Unfortunately, one may not be financially stable to handle a repayment of these debts in full.  The monthly payments that include high interest rates, late fees and at times finance charges, add up to substantial amounts.  Over time, the accrued interest keeps growing on the principal and the ability to pay becomes more and more difficult while the debt keeps on growing.

Once the consumer is no longer able to meet the minimum payment requirements the account enters into a delinquent status.  Having delinquent accounts will further damage a consumer’s financial situation and especially one’s credit history.  The sky rocketing interest rates, increased minimum payments and inability to meet your payments on time will result in negative posts to the consumer’s credit report.  The previous amounts due on those accounts now becomes inflated to an astronomical amount and keeps growing every month.  That’s when the consumer really starts drowning in debt, since the interest is still accruing, late charges are piling up and the amount owed is beginning to grow to extreme proportions.  That’s when a lot of people are turning to bankruptcy as they don’t know of any other solution.  Apart from filing bankruptcy, you also have an option of consulting a professional debt settlement company.  Debt settlement companies will thoroughly analyze your financial situation, determine the monthly amount you can afford to pay and will start negotiating with your creditors in order to achieve a settlement for less than the original amount owed.

After delinquent debts begin to accumulate, many consumers are unaware of the multitude of options they have at their disposal.  Some consumers feel compelled by their initial agreement and responsibility to repay the debt, they hurt themselves financially in other areas just to cover the monthly minimum payment amount.  Most consumers think they have to pay every cent back immediately, or will face serious consequences.  However, before pulling out a second mortgage to consolidate bills, or considering filing a bankruptcy that may liquidate all assets, the consumer should be informed of all the existing solutions. Spending some time doing a little research can lead one to find options that will help alleviate financial stress.

Debt Settlement Options

Most consumers who are overwhelmed by large amounts of debt tend to do one of two things: either sacrifice in every area of their financial portfolio to repay the debt, leaving them without funds or assets of any kind. Or they simply ignore their debt, let it continue to accumulate and add up, and have creditors and debt collectors harass them continually.  None of these options is financially or emotionally healthy, for obvious reasons.  Depending on the amount of debt and all the various circumstances, both of these options might actually be the case.  However, they are definitely not appropriate for everyone.

People who have small debts that have become delinquent should try to repay in full in a short period of time. Repayment plans are great options, and can be accomplished in a relatively small time frame (anywhere from 2 months to 3 years), with a monthly payment amount that is both comfortable for a consumer’s financial situation and acceptable to the creditor. However, if the delinquent debt is very large, and that interest continues to accumulate, then other options should be considered.  There are several reputable debt consolidated organizations that can help with a small amount of money or you can even consult with a private financial analyst to see what can be done to get the debt consolidated.

One of the most popular options available to consumers is an option to pay the debt. This option is available for every account, regardless of whether it’s due to a creditor, debt collection agency or paid through a credit counseling agency. The debt always varies depending on the consumer and the details of the delinquent debt, but it is usually the best option for all parties involved. The consumer usually saves a substantial amount of money, possibly even some time – and the delinquent debt is repaid to a satisfactory state.