What Percentage of a Debt is Typically Accepted in a Settlement?
The answer to this question is as versatile as the types of debt settled, which creditors agree to the settlements and the amount of debt you owe. Since many creditors settle debts often, they have a scale set up to go by. Others will negotiate only when the problem arises. Generally, however, you can expect to pay anywhere from 40% of the original debt up to 85%. Some debt settlement experts can negotiate far smaller percentages, so looking for an experienced company is the best choice.
Can You Settle Debt On Your Own?
It is very possible to settle debt on your own. As I previously stated, I will often receive debt settlement offers in the mail. At this point, the only things I have to do is accept it and pay the settlement amount. If you have received these offers, the same applies to you.
If, however, you are starting from scratch, the process is a bit different. It can be exhausting and take a lot of time to get in touch with the correct people and then negotiate the settlement. It is important to note that you may not get as good of a result as an expert. They know what exactly to do. An expert may be able to negotiate down an extra 20% or so that can save you money.
Though it is possible to settle debt yourself, it is worth the time to consider hiring a debt settlement company. This is especially true if there are many debts to negotiate. It comes down to deciding if you want to put in the extra time and effort or if you would rather let the experts do it for you.
If you choose to try it on your own, gather all of your debts. Put them in the order you would like to attack them in. You may list them in order by amount, or in order of how much interest is racking up. Either way, pick your first debt to work on. Determine how much you can pay for it, call the creditor, and make the offer. It is best to have that amount available to pay that day or at least during that week. This will likely help you get settlements easier.
One do it yourself debt settlement option is to get a loan to pay off debt or consolidate debt into a single lower payment. Ideally, the payment is with a lower interest rate and payment.
What Are Debt Settlement Risks?
Debt settlement can sound like paradise compared to what you currently deal with, especially if you cannot seem to keep your head above water. And it can help some people a great deal. It is important to note, though, that there are risks that come with this process and those risks may not be worth it to you.
It will affect your credit negatively. Sadly, anything other than paying a debt in full is going to put some negative marks on your credit. These marks will most likely be nowhere near as bad as bankruptcy. It can be worth it there is no other way to get the debt paid, but it should only be done after weighing out the options.
You may not get the results you want. Not every creditor will negotiate with all debt settlement companies. Some may not negotiate at all. So while you may dream of knocking your debt down to half or less, that may not happen.
It is not an overnight process. Paying off debt takes time so if you think you will be getting out from all your debt in a year, it could end up taking 5 years. Debt settlement is not a quick fix.
Interest does not stop growing. Interest adds onto your debt until it is paid in full. You have to pay to get the debt settled. Besides paying for the debt itself, you will owe the debt settlement company. Also, you will likely have to pay taxes on any forgiven debt. Before taking the plunge, consider all of this. You may find that debt settlement is not worth it for you.
What Does Debt Settlement Cost?
The cost of debt settlement ultimately depends on the debt settlement company. They may charge as much as 25% of the debt they settle. That is a high amount, especially if they cannot get much of the debt reduced. Earlier we discussed that you can expect to pay anywhere from 40%-85% of your debt. If the debt settlement company only gets your debt reduced 15% but charges you 25% of the original debt, you will lose money. In this case, it is cheaper to either chip away at the debt, or call the creditor yourself. This is another reason it is important to find a reputable company with good results.
Financial struggles are a very prevalent problem everywhere, regardless of income, location, job, etc. Anyone can get in over his or her head, be it from a loss of income or a lack of responsibility with money. It can be extremely tempting to take what may seem like the easy way out, i.e. bankruptcy, debt settlement, etc.
However, all of these options involve risks and negatively impact your credit. The decision to take one of these steps should not be taken lightly. It should be weighed heavily against other options. It may benefit you to seek the counsel of a wise friend or mentor. Let them look at your situation with you and guide you in the right direction