When you are struggling with your debt or multiple debts you can either opt for a consolidation, debt settlement or bankruptcy. Assuming that you know the pros and cons of these all if you choose for debt settlement then be informed it is not required to hire the service of a professional debt settlement company always. You can easily imitate them and their methods provided you know it. There are several instances in which consumers have been successful in settling their debt themselves.
All you have to do is take the initiative and call up the customer service department of the bank or financial institution or the credit card company depending on the type of loan you want to settle. However, you must make sure first that you are capable enough and have adequate resources amassed to make a lump sum payment that the lender will ask for.
You must also remember that deciding or agreeing with a payment plan is indeed not an option for debt settlement. It is only when you can pay the lump sum that the credit card company or any other will agree to negotiate with you to settle your debt for a lowered amount.
The pros and cons
Advantages of negotiating for your debts on your own with the creditors include:
- You can save on the fees that you would have to pay otherwise to an attorney or a professional debt settlement company which can range anywhere from 15 to 30 percent of the amount saved and
- Have more and better control over the negotiation process that may or may not act as a motivational factor to continue with the process successfully.
As for the downsides of do-it-yourself debt settlement it can be said that:
- Creditors may not be willing to settle your account directly with you if they have and follow their own policies regarding it
- You might receive less advantageous rates for debt settlement which could have been better if there were a professional backing you up due to their relationship with the creditors
- You will lose on the benefits of package bulk settlements often followed by the debt settlement companies
- You may also face difficulty getting through the process due to long delays in paperwork processing and the decision makers and
- You may be left in the dark if you do not know the settlement offers and terms as every creditor follow different processes and procedures.
Seeing the number of pros versus the cons, most consumers are willing to pay the fees to a professional debt settlement agency for the following additional benefits:
- Going by the debt settlement reviews the rate of success by the professional companies are much more than those managed by the consumers themselves
- These companies have a dedicated customer service department to help you with any questions and in any difficulties during their process
- They will provide valuable tips and support you especially when the creditors become aggressive
- You will get third party help easily if your case needs to be escalated to legal status as these companies have a wide and extensive network
- All intimidating unfamiliarity and complexities of the debt settlement process can be eliminated and mistakes avoided and
- They will know about the fine print and review it carefully along with all correspondence, agreement and all paperwork related to the proposed settlement.
You must know that a debt settlement process can be very difficult, long drawn and emotionally draining. The professional will provide you respite from this with an assurance of the best settlement of your debt.
Incentives for the creditors
Apart from your limited benefits, do-it-yourself debt settlement also provides a lot of benefits and comes with several incentives for the creditors as well. The primary objective of the creditors being recovering as much funds as possible from you which would have been lost otherwise if you filed for bankruptcy. This process provides them with exactly that, and they can recover much more than they could have following any other collection methods.
- Moreover, collection agencies, attorneys and even debt settlement companies will charge commissions and fees as high as 30 to 40% on the recovered funds resulting in a substantial loss for the creditors.
- Apart from that, the bad debt purchasers buy portfolios of such delinquent debts from the creditors not wanting to use their internal collection efforts usually will pay them as little as 1 to 12 cents on the dollar once again resulting in a huge loss. The cost of purchase will depend on the on the age of the debt with the oldest being the cheapest.
All collection calls and lawsuits are costly and more often than not can push the debtors into bankruptcy resulting in no fund recovered. This is one thing all creditors want to avoid, hell or high water and hence agree to settle a debt preferably directly with the debtors.
Know your terms
Therefore, a do-it-yourself type of debt settlement can be very useful to you offering you a far better chance to get your debt reduced and avoid the consequences of filing bankruptcy. All you have to do is to know the terms and conditions on which you will agree with your creditors.
You must know that so long as your debts remain unpaid, there is a chance of a lawsuit filed by the creditor. Therefore, make sure that you get an agreement in writing and make things clear right at the outset. Remember, settling a debt needs a long time as the creditor will not receive any amount that is not substantial.
Also, know about the tax consequences and tax liens along with the domestic judgments so that everything is clear and remain unaffected.
Most importantly, you must know about the eligibility of your debts before calling your creditors for settlement negotiation. For example, student loans can be attached to bank accounts as per the recent legislation even if it is not federally subsidized providing the possible protection from Chapter 7 bankruptcy.
A little information and knowledge will help you succeed in settling your debt on your own.