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Understanding Debt Settlement

Aug 17, 2007
If you are in serious debt crisis right now and you are at a lost of what to do, have you considered hiring a third party to settle your debts for you? A debt settlement company is recommended for those who wish to have their original debts possibly lowered to as much as 30 to 60 percent markdown. Moreover, if pressuring tactics from your creditor has taken a toll on your well being, then negotiations may be better off in the hands of someone else other than that of yours.

If this is the first time that you have entertained the thought of allowing a third party to settle your debt, pay attention to facts about debt settlement, which will be discussed below.

Factors included in debt settlements include the following:
1. Principal debt amount: This refers to the original amount that you owe your creditor. This amount can be negotiated by your debt settlement company, and you may end up with a significantly lowered amount to pay for.
2. Late fee charges: These are fees associated with overdue payments. Your agent may be able to waive this off for you and save you a huge amount.
3. Annual Percentage Rate (APR) is the actual cost of borrowing money from your creditor. This involves the interest rate for the money you borrowed along with other charges that come with it. Your agent may be able to negotiate for a lowered APR with your creditor.
4. Monthly settlements refers to monthly payments that you make through your debt settlement company, which will eventually forward the money to your creditor in due time.
5. Annual timeframe: This involves the deadlines for which payments are expected to be received. Even this can be negotiated by your agent where extensions may be made to allow you to pay off the debt at a longer period of time.

The choice of hiring a debt settlement company to do the dirty work for you also has its disadvantages. For one, it will reflect badly on your credit history and will remain there for a period of seven to 10 years. On the other hand, this may still be the better option compared to bankruptcy. Also, hiring a third party has its costs. At an average, it will charge up to 8 to 15 percent of your total debt as fee for their services. And despite the presence of a third party, some creditors still continue to harass the debtor.

Ultimately, weighing the pros and the cons will help you come up with a decision on how you plan to do your debt settlement. Regardless of your decision, the objective of paying back the money that you owe must always be kept in mind.
About the Author
Tristan Andrews writes useful articles about collection agencies. Discover and explore the world of debt collections. Find out how using a collection agency can expand your financial horizons at http://www.advinfoc.com
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