What You Need To Know About Debt Settlement
What sort of credentials should I be looking for in a debt settlement company?
A strong candidate to provide your debt settlement services should be an AFCC accredited member. Their online reputation should be strong (read- very few if no online complaints).
Their negotiators should be IAPDA accredited…and of course, they should charge NO UPFRONT FEES.
In fact, you shouldn’t pay anything until one of your debts is actually settled.
When do I start saving money in a debt settlement program?
Entering a debt settlement program doesn’t cost anything. You don’t pay until the first debt is settled. The first debt can be settled anywhere from 12 to 40 months after you enter the program. The debt is always settled for less than you owe. We take 40% percentage of the savings. So if you owed $40,000 dollars and we settled the debt for $30,000. You get to keep $6,000 of that and we keep $4,000.
When will I stop getting harassing phone calls?
We have proven strategies to reduce the amount of harassing phone calls. Because the worst phone calls come from collection agencies, we just go to those agencies directly. They know that most people never pay…no matter how many times you call them. So we patiently but firmly persuade them to stop the calls, and discuss your settlement options. They see this approach and take it seriously. They have a fine line to walk, and if it can be proven that they are indeed “harassing” you as, as the law defines it, they are looking at a huge fine.
How Do I Know What Kind of Progress I Have Made in the Program?
We call you each time we settle a new debt- and depending on how much debt you have, it may take a longer or shorter amount of time get the calls. We also do a regular check in every month to see how you are doing, and provide the support necessary to resolve your financial burdens. This includes a regular budget analysis and unlimited customer support.
How Do You Decide When to Settle?
There are a number of factors determining when the best time to settle is- including financial variables, as well as your relationship with the creditor. We proactively monitor the creditor and select the best time to pursue a negotiation.
Does The Program Always Work?
In over 95% of all cases, some kind of agreement is reached.
Most of our clients find it in their best interest to pursue settlement because they don’t have to pay unless it works. If you belong to that 5% that may have a challenging time getting settlement- we tell you that right at the start. In that case, you may be a good candidate for our bankruptcy program.
What Are These New FTC Guidelines I Keep Hearing About?
The new FTC guidelines are a welcome regulation of our industry.
FTC guidelines now prevent debt settlement companies from doing any kind of false advertising.
- This includes “skewing” statistics, or “cherry-picking” success stories to only present positive outcomes.
- It also prohibits debt settlement companies from charging upfront fees or making empty promises.
Debt settlement has now become one of the most heavily regulated industries in the country, ensuring that you, as the consumer, will be protected.
What Does Debt Settlement Do to my Credit Score?
In order to get creditors to negotiate with you, you have to scare them a little bit. This means deferring on your payments until they get the idea that you might not pay at all. Nothing freaks them out more. During that time, they can put negative marks on your credit report. However, the newest items on your credit report matter the most. So after you have settled your debt, you can start adopting healthy financial practices and push all the negative marks to the bottom of the report.
Q. What if my creditors won’t settle?
A.If a debt cannot be settled and instead you must make alternate payment arrangements on the full balance of a particular debt, we will simply remove that debt from the program and recalculate the monthly payment and the fees associated with that debt. You do not pay us fees toward that particular debt if we are unable to reach a settlement on it. This is rare. Most Creditors are reasonable and willing to accept a settlement on a delinquent debt if a legitimate hardship situation can be demonstrated.
FAQs
Debt consolidation is almost always the better choice. And while it doesn't change how much you owe, you might save by getting a lower interest rate. However, you usually need at least good credit for this tactic to work.
Why do I keep getting denied for debt consolidation loan? ›
Reason 1: You have too much debt for your income level
To consolidate your debts, you need to have a high enough monthly income to be able to easily make the monthly payment for your consolidation loan, which is calculated based on the interest rate and how long you plan to take to pay off the loan.
What is the catch with debt consolidation for the consumer? ›
You may pay a higher rate
Your debt consolidation loan could come with more interest than you currently pay on your debts. This can happen for several reasons, including your current credit score. If it's on the lower end, lenders see you as a higher risk for default.
Is it hard to get approved for debt consolidation? ›
Only available to those with decent credit: Debt consolidation is, ironically, only a possibility for those who have a high enough credit score and a low enough DTI. It won't solve underlying financial flaws: You'll need to change your income, spending or both to stay out of debt once you pay it off.
What is a disadvantage of debt consolidation? ›
The potential drawbacks of debt consolidation include the temptation to rack up new debt on credit cards that now have a $0 balance and the possibility of hurting your credit score with late payments. Also note that the best personal loans go to consumers with very good or excellent credit, so not everyone can qualify.
How much debt is too much to consolidate? ›
Debt consolidation is a good idea if monthly debt payments don't exceed 50% of your monthly gross income, and you have enough cash flow to cover debt payments.
What is the minimum credit score for debt consolidation loan? ›
Every lender sets its own guidelines when it comes to minimum credit score requirements for debt consolidation loans. However, it's likely lenders will require a minimum score between 580 and 680.
How long does credit ruined after debt consolidation? ›
Debt consolidation itself doesn't show up on your credit reports, but any new loans or credit card accounts you open to consolidate your debt will. Most accounts will show up for 10 years after you close them, and any missed payments will show up for seven years from the date you missed the payment.
Can debt consolidation be declined? ›
If you've been declined for debt consolidation loans, there are a number of reasons why this could, in fact, happen. A lender will use your credit report as well as their own lending criteria to make a decision on whether they will offer a loan.
Can I still use my credit card after debt consolidation? ›
The short answer is Yes, people are generally allowed to use their credit cards after debt consolidation as it does not typically involve closing credit card accounts.
Summary: Best Debt Consolidation Companies of 2024
| Company | Forbes Advisor Rating | Learn More CTA text |
|---|
| SoFi® | 5.0 | Compare Rates |
| Upgrade | 4.9 | Compare Rates |
| Happy Money | 4.4 | Compare Rates |
| LendingClub | 4.4 | Compare Rates |
2 more rowsJul 10, 2024
The 4 Cs of Credit helps in making the evaluation of credit risk systematic. They provide a framework within which the information could be gathered, segregated and analyzed. It binds the information collected into 4 broad categories namely Character; Capacity; Capital and Conditions.
Is debt settlement a good idea? ›
If you're behind on your credit card payments and looking for a solution, you might be considering debt settlement, which promises to help clear your debts. However, debt settlement is risky and should be a last resort for most borrowers.
What kind of debt qualifies for debt consolidation? ›
Four types of debt are commonly consolidated: credit card debt, student loan debt, medical debt and high-interest personal loan debt. You may reduce the overall cost of repayment by securing better terms and interest. You'll also have a single payment to keep track of instead of several.
How long does it take for a consolidation loan to be approved? ›
The entire process typically takes between four and six weeks from the date your application is received. Before completing a consolidation application, carefully consider the following information to determine whether loan consolidation is the best option for you.
Does debt consolidation hurt your credit? ›
Debt consolidation can negatively impact your credit score. Any debt consolidation method you use will have the creditor or lender pulling your credit score, leading to a hard inquiry on your credit report. This inquiry will decrease your credit score by a few points. However, this credit score decline is temporary.
Should I settle or pay debt in full? ›
Paying a debt in full is better than settling a debt
You'll also save money. Settling the debt eliminates future interest and reduces the amount you'll repay to the lender. When you settle a debt, the creditor or debt collector will typically report the account as settled for less than what you owed.
Are debt settlements worth it? ›
Debt settlement might be a suitable way to manage your overwhelming debt, but it could also drive you even deeper into a financial hole, bottom out your already-damaged credit score, and put you in legal peril. So be careful. Debt settlement is risky business. Check into all your other options before you go there.
What is the best debt relief program? ›
- Best for credit card debt: National Debt Relief.
- Best overall: Money Management International.
- Best for customized options: Accredited Debt Relief.
- Best for all unsecured debt types: Americor Debt Relief.
- Best for customer support: Pacific Debt Relief.
- Best in availability: Century Support Services.
