Is debt settlement the right choice for your needs?
In case you are struggling with finances, and you are facing filing for bankruptcy potentially then you should investigate debt settlement. But debt settlement will not be working for everyone. So you have to try and understand completely how it will work along with all the benefits and the potential drawbacks that this option will bring you before you start to enroll into any debt settlement or debt consolidation program and then negotiate your settlements. This article will help you understand if debt settlement will work for you or not, here are some points:
1. Can you repay your debts?
If you are able to repay all your debts off completely, then you must do that. Debt settlement is only for those people who are absolutely financially messed up and are not able to successfully pay off their debts even if the balances are required.
2. Are you experiencing any financial difficulty?
You must try and repay the debts if you can. It will not be correct for you to enter into any debt negotiations because creditors can often try to take your financial hardships to their advantage for negotiations into considerations. These hardships can often include unemployment, income loss, unforeseen medical bills and illnesses in the family and even divorces.
3. What type of debts can you settle?
Debt settlement will only work for unsecured debts like credit card accounts, medical expenses and some department store credits and other types of personal debts. Lenders will not be historically willing to negotiate and even settle the secured debts, like automobile loans, home loans, student loans and some types of other types of loans which are secured with collaterals.
4. Can you save up and even set aside some money in each month?
While you will be unable to repay your debts fully, you must be financially capable to at least pay certain portions back from your debts if you can save something each month. This amount must be still less than those minimum monthly payments which are required from your creditors. But even after saving and consistently set aside some small amounts every month and the amount that will add up to and can offer you some compromised payoffs to settle some debt. It can take you some months, but if you are still consistent and also patient than the funds will slowly add up.
5. Can you function with budgets?
If you are able to save money and set some funds aside for paying off your debts, then you must try to operate within tight budgets. This is incredibly difficult, but you must follow it strictly. If you do not become financially disciplined, then you must start learning how to do it. Pursuing the process of debt settlement can be quite an honorable method for resolving your tough financial situations, but it will need some disciple on your part, and this will mean some budgeting.
6. How much should you care about your credit?
The process of debt settlement can get damaging for your credit. This is since the process can result in missed payment and the accounts can often go in charge-offs before it gets settled. If you can prize your credit scores more than being free from debts, you must think of getting second and even third jobs so that you can completely repay all the debts you owe and then even skip the debt settlement option altogether. But otherwise, you must be aware of the fact that negative marks might remain in your credit reports for even seven to ten years. But with time the negative marks will get old, and they will be less impactful on your credit scores.
7. Do you want to avoid filing bankruptcy?
Debt settlements are basically about helping to repay your debts based on the limited capability of your finances and then keep yourself out of bankruptcy, assuming the fact that you want to avoid bankruptcy. This is very important because some people will not even care about having long histories of bad credits or the fact that they may never be able to file chapter 7 bankruptcy again for at least eight years. Some people will not even have a home which they are trying to save so they won’t have any inhibitions while filing for bankruptcy. In case you do not want to file bankruptcy then debt settlement is the right option for you. IT will help you become financially independent after some tie, and you will be able to live off your income.
8. Can you separate yourself emotionally from your debts?
When you are pursuing debt settlement, your creditors will not be going to please with you as they would want you to pay all the debt you owe them along with interest with some fees and with all the other financial charges which they can dump on you. You can get calls from debt collectors, and a lot of debt collectors will be quite nasty too. They will often use your guilt to get the consumer to pay off the debts even that consumer does not have the money to pay off the debt or even owe them the debt. Thus the consumers who are pursuing debt settlement will be required to disassociate themselves emotionally from the debts and start being vigilant to become debt free finally.
9. Can you be patient?
Debt settlement is a long and tedious process. You must be patient for at least three years in order to become financially independent. You have to manage within strict budgets and start surviving on the income you make without incurring further loans.
You must go through your debt settlement ratings about the companies before you apply for debt settlement from any company.
Becoming financially independent is necessary for everyone, as it is very easy to get sucked into a debt trap. You can consider debt settlement as a method to become debt free. It will take time and patience, but you will ultimately make it work and become debt free.