Debt settlement is an effective way of getting out of a debt that has spiraled out of control. This option presents the debtor the option of lowering the total amount of money owed, as well as the chance to be free of debt in just around 24 to 36 months.
Settling one’s debt is usually done through the help of a debt settlement agency. The agency negotiates with the creditor to reduce the amount of money owed in exchange for a one-time payment. While the negotiations are taking place, the client is setting aside money that will go towards the payment. The lump sum payout happens once the agency and the creditors reach an agreement, and the client is forgiven the rest of his debts after that.
Debt settlement can be used for unsecured debt. It’s a good method to use if you think that your debt is too big for you to pay off or if you feel it will take a long time for you to become completely debt free. Debt settlement is a viable answer to debts such as:
Credit Card Debt
Credit card debt is the most common type of unsecured debt; as long as credit cards are around, it will exist. It’s only too easy to accumulate credit card debt as it is a revolving line of credit. You can borrow continuously and simply carry the balance over.
Of course, the best practice is to settle everything you owe monthly. Remember, on the average, interest rates are around 15%. However, this can skyrocket to 25% or even more if you fail to make your payments.
Compared to credit cards, personal loans acquire lower interest rates. Personal loans, also known as signature loans, are funded by banks and typically have a cap. Ideally, this type of loan is used for planned expenses. For example, you can take a personal loan to start a business, pay for house repairs, or even go on a vacation.
A good credit score is a necessity if you’re planning to apply for a personal loan. This is because the lenders will check your identity and credit worthiness before granting your application. Typically, you’ll need to present your driver’s license, social security card, or passport. You will also need to provide your address and details of your income so they can evaluate your ability to repay the loan. This involves showing pay slips, bank statements, or tax returns.
When businesses unexpectedly and desperately need cash, they can turn to unsecured lines of credit. In such a situation, the credit lines serve as an emergency source of fund. Businesses can borrow quickly with competitive interest rates, high credit limits, and flexible repayment options.
There are two kinds of bank credit lines: a traditional line and a non-traditional line. A traditional line offers a fixed amount of money with check-writing privileges. Meanwhile, a non-traditional line is like a company credit card. It is ideal for separation of business credit and personal lines.
Then, there are medical debts. Medical debts refer to debts that are incurred through health care costs and other expenses related to medical treatments.
In addition to these, there are other types of debt that can be resolved through debt settlement, such as peer-to-peer loans. It’s important to consider debt settlement before declaring bankruptcy. This way, you can avoid the possibility of losing your assets and unnecessarily ruining your credit score, especially when there are other ways out of your debt problem.
To learn more about debt relief solutions and how to start living with financial freedom, contact CreditAssociates for a free consultation or use our Savings Estimator to see how much you could save.