Battling debt is a lengthy yet rewarding process. And with debt settlement, you can fix it without causing too much damage to your credit score. With this guide, you’ll have what you needed to get the debt settlement assistance you need.
Let’s begin!
What is Debt Settlement?
When settling debt with a company, you can offer your lender to pay less than what you initially owe while having the rest of your debt forgiven. On some occasions, you can negotiate the amount down to 20%-30% of your original debt amount.
However, debt settlement only works on unsecured loans or debts that don’t have collateral such as personal loans and credit cards. Loans that have collateral (i.e., home or car loan) will have the bank repossess the asset and not negotiate for a different payment.
Understand that you’ll have to pay for the amount of money negotiated in the lump sum. Because of this, only negotiate with one company at a time. Debt settlement negatively affects your credit score, because the debt is still settled, but this is better than having an overdue or outstanding debt on your credit report. This might be a better option than filing for bankruptcy.
Can I Negotiate For Debt Settlement Individually?
While you can work with companies that help with debt settlement, you are allowed to negotiate debt settlements on your own.
For this to occur, you have to be organized. Start by listing the debts that you’re behind and determine the amount that you currently owe. We suggest that you save at least 50% of the amount and then call your lender to offer the settlement in full. Also keep all of your financial documents with you to ensure that you can pay the debt off in full without setting yourself up for later failure.
You should leave some room for negotiation as well.
So, you should initially offer your lender a fraction of the of the amount that you have. (Or just e a smaller amount of your current balance). If the lender accepts this payment, you will have to send a letter requesting that the remaining debt will be forgiven if this payment is paid off within the agreed due dates.
And make sure that you keep a copy of your debt settlement check and letter on file. This will protect you if the company accidentally (or intentionally) tries to argue that you owe them more money. After you’ve completed your debt, you can start this process again with another lender.
Benefits of Debt Settlement
Before considering any other options, debt settlement has a lot of benefits to help you reduce your debt. Here’s how it can help:
- Debt settlement can help with clearing up debt faster than paying it off.
- Even if you have the best debt destroying plan, it will take you a couple of years to pay off a substantial amount of debt, which only pushes your financial goals back in the long run.
- Debt settlement negotiation helps you take care of debt for a fraction of the cost instead of just ignoring it and praying that it goes away.
- Debt settlement helps with paying off your overall debt by allowing you to systematically attack the main issues, which is useful with managing your budget.
Debt Settlement Alternatives
There are debt settlement alternatives you can choose from. One way is to make a debt settlement repayment plan on your own. A good example of this is the snowball method, which helps pays off your debts from the smallest to largest balance, and you can put this money towards the next smallest debt amount.
Alternatively, you can pay off your debts from the highest to the lowest interest rate. You can also seek credit counseling. You can make monthly payments, and you can use it to pay off your creditors. While it is better than debt settlement, it will definitely affect your score. Finally, filing for bankruptcy is another option when all others are exhausted. But this will severely affect your credit score and make it harder to borrow more money in the future.
To conclude, you can get debt settlements in Winnipeg. By making a plan to get your debt paid off, you’ll be able to pay it off on time. So make sure you get some professional help so you can make the best potential debt settlements offers possible and ensure things go as smoothly.
Sources:
- https://www.thebalance.com/a-guide-to-debt-settlement-2385859
- https://www.nomoredebts.org/debt-help/getting-out-of-debt/how-to-get-credit-card-debt-relief-canada.html
- https://www.winnipegfreepress.com/business/finance/drowning-in-a-sea-of-debt-137812353.html