If you are in the midst of heavy debt and you've looked around for a solution to your problem, no doubt you've come across debt settlement offers and are curious as to what they are. Here are a few things that you need to know about debt settlement programs.
Debt settlement companies work as a kind of “middle man” between you and your credit lender. They will try to resolve your debt problems by negotiating with your creditors to see if they can lessen the debt that you owe. Debt settlement companies are mostly known for dealing with credit card debt settlement but they also handle other types of debt.
When you are dealing with a debt settlement company, they will usually require a “lump sum” from you to be able to negotiate with your creditors. In the best case scenario where you have an adequate “lump” amount, negotiations can then proceed. However, if you don't, the company will ask you to stop paying your credit company and pay them instead. Your payments will then be deposited to your account in the accompany and, once it reaches a certain amount, the debt settlement company will then negotiate with your creditor.
Usually, a debt settlement company already has an ongoing relationship with your creditor. Thus, you can expect for the negotiations ot move quickly. The debt settlement company will offer for a percentage of your fees to be “forgiven” in exchange for a payment of your lump amount. Depending on the lending company and the lump sum amount, the lender may be willing to settle as they don't really want your continuing debt to add up to their already big debt write offs.
Debt settlement companies usually charge upfront for their services. Furthermore, they may charge anywhere from 25% to 35% of your debt balance based on the amount you owe, the amount you can save through debt settlement and the number of accounts that you have debts on.
The amount of time it takes for debt settlement to remove all your debts and make you debt free depend largely your debts and on your lending company. However, most debt settlement companies can settle debts anywhere from 2 to 4 years.
With the current economic crisis going, you really should do your best to lower or remove your debts. In this regard, debt settlement companies can be quite helpful. Just make sure that you are aware of the legality of your debt settlement company and always insist that, whatever agreement you enter into, there is a written and duly signed document to back it up.