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Debt Settlement FAQs
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The US Census Bureau website states that as of the year 2007, outstanding consumer credit card debt was at approximately $2,518 billion dollars. This number has continued to increase in 2009, as more people than ever are using their credit cards just to make ends meet. Many Americans are looking for ways to get free of their burdensome debts and debt settlement programs are one of the most cost efficient and effective means of eliminating debt in a swift manner. People have questions about settlement programs that must be answered in order to make an educated decision about whether or not it is the right option for their particular situation.
Here is a brief summary of FAQ:
How does debt settlement work?
Settlement involves contacting each of your current creditors in order to negotiate a reduced lump sum payment in order to close out your account.
Why would creditors let me settle my account for less than what I owe?
The bottom line is, creditors would rather receive less than the full amount owed than have to turn your credit account over to collection agencies for pennies on the dollar. Even if they negotiate up to 75% off your initial amount owed, they will come away with more than collection companies would have paid for your account.
Do I really need to work with a settlement agency?
While you are free to call each of your creditors on your own to negotiate settlements, you are likely to get better results if you work through a professional agency. Settlement companies understand the intricacies of finance law and can ward off threats from your creditors, while using their reputation in the industry to command respect in negotiations.
How much does settlement cost?
While various settlement agencies charge differing fees for services rendered, you can expect to pay an upfront fee as well as monthly fees to your settlement agency. Research the rates of several different prospective companies before settling on one with which to do business.
Are all settlement companies honest?
The simple to this question is, no. While there are many reputable debt settlement agencies from which to choose, there are also wolves out there looking to prey on people in a bad financial situation. These con artists will take your money and be of little service to you.
How can I avoid settlement scammers?
Check out each of your prospective settlement companies with the Better Business Bureau (BBB), an unbiased watchdog organization that holds businesses accountable for their actions. If any complaints of fraud or negligent service have been filed against any given settlement agency, the BBB will alert you to them in short order.
Where should I start looking for a settlement agency?
The internet is a great place to begin researching various settlement companies, in order to get a good idea of the going rates and various customer service levels being offered. If possible, try to do business with a local settlement company, so you get the benefit of live customer service, as well as the reassurance that your agency has a firm grasp of local debt collection laws.
Will settlements negatively affect my credit score?
Because your accounts are being settled for less than the original amount owed, your creditors will report that your account was not closed in good standing. This can negatively affect your credit score in the short-term, although it will stop the monthly negative reporting you were receiving for late or non-payments. After an initial ding from credit reporting agencies for your settlements, your score should improve regularly, especially if you are responsible with whatever credit cards you choose to keep active.
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