Negotiating a debt settlement with your creditors is one of the most effective ways to save money by reducing debt and paying it off, it is a common approach for people who are troubled by the debt crisis. If you have a substantial amount of unsecured debt and you are not managing to keep up with your payments, then you might want to seek the help of a debt consultant.
Debt Consolidation
When you sign up to a debt consolidation program, the debt consultant negotiates with your creditors to lower the interest rates and monthly payments so that it becomes easier for you to pay off your debts. The consultant will consolidate your multiple payments into a single monthly payment to the consolidation company. This relieves you of the tension of making payments to multiple creditors.
Debt Consolidation Loan
If you don't wish to hire a consultant, some companies offer a debt consolidation loan to pay off all your debt obligations, and allowing you to repay with lower monthly payments or a lower interest rate. The loan will save you from being charged additional late fees and penalties for missed or incomplete payments.
Debt Settlement
Debt settlement, also known as debt negotiation, is a process which involves repaying only part of the amount owed. When you use a debt settlement company to settle your debts, your debt consultant contacts your creditors and asks that they reduce your total still owed. Creditors will sometimes agree to this as they would rather receive a partial payment than have to continually chase you for money you still owe. A typical settlement can range from 40-60% of the total debt.
Debt settlement is particularly suitable for those who do not have enough income to manage a repayment plan on other debt relief options.
Do It Yourself
You could avoid paying debt relief companies by negotiating with your creditors on your own. You just need to provide proof of hardship to your creditors so that they believe that you are unable to make further payments on your credit cards. Negotiate with them to reap the benefits of lower interest rates, but wait for the right time so that you do not face legal action.
Making regular monthly payments, instead of erratic payments whenever you can afford it, will build your credit score over time, and by using budgeting software to keep control of your finances and stick to your plan, you could be debt free in a few short years.
