You would agree that taking out a loan is harder than repaying it. According to financial experts, the percentage of Americans in debt is around $80. This means that 8 in 10 Americans are battling one debt or the other. If you are in debt, you should pay it off before it is too late. But many debtors are finding it hard to settle their debt. If this is you, what do you do? One of the best ways to get out of this mess is by leveraging debt settlement companies. These companies are effective in settling debts. However, you’ll be charged a little percentage for their services. How much do debt settlement companies charge?
The percentage debt settlement companies charge varies depending on the policy of the company. Most debt relief companies charge 15% of the amount you originally owed or, in some cases, it can be 15% of what you paid.
As a financial expert, I always advise debtors to settle their debt before it gets sold to a debt company. Two unpleasant things usually happen when your debt gets sold to these agencies. First off, your credit score will take a hit, and secondly, the debt collectors will constantly be on your neck. To avoid this, what do you do? If you don’t have enough money, the best way to save yourself is by contacting a debt settlement company. But is debt settlement worth it? How much do these companies charge? As we progress, you’ll find out.
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What Percentage Do Debt Settlement Companies Charge?
When you default on your debt for a few days, some creditors may call you to remind you of your obligations if you have forgotten. However, if you still fail to pay what you owe even after several calls and warnings, the creditor may raise the interest rate and include late payment fees.
If that doesn’t compel you to make payment, the creditor may decide to sell the debt to a debt collector. When this happens, expect the worst. Depending on the debt you owe, you could be taken to court, and your wages could be garnished, plunging you into a deep dark financial quagmire.
Debt Settlement Companies – Your Way Out?
Loans are great. Without them, those of us who can’t afford to purchase a house outrightly will probably be living on the streets. Many students will drop out due to their inability to afford the high college tuition fees. Also, a lot of promising businesses would have crumbled. It is safe to say that loans are our saving grace in times of financial hardship. But, a loan is often enjoyed when you can pay it back in time. If you can’t, the loan which you once enjoyed may end up being your bane.
Today, many debtors are leveraging several debt relief options to settle what they owe. One of those options, as I mentioned above, is debt relief companies. But what are debt settlement companies? How does debt settlement work?
What Is a Debt Settlement Company?
Debt settlement companies help debtors negotiate, settle, or alter the terms of their debt to either a creditor or a debt collector. Dealing with debt relief companies can be tricky; thus, always ensure that you only consider this option when there isn’t any left. Also, always use the best debt settlement companies.
Debt settlement companies, who also go by the names debt relief, or debt adjusting companies, always claim that they can negotiate with your creditors to cut down the amount of debt you owe.
While working with debt relief companies remains one of the best ways to settle debt, I’ll advise that you consider other alternatives before contacting one.
Other good alternatives are:
- Working with a nonprofit credit counselor
- Negotiating directly with the creditor or debt collector
Let us take a look at how debt settlement works.
How Does Debt Settlement Work?
Debt settlement works in a simple way, but it can be quite complex if the creditor or debt collector is not corporative.
Debt settlement companies often try to cut down what you owe, mostly on unsecured debts like credit cards. Some types of debts are unnegotiable. Thus, if you are battling such debts (like a house that can be foreclosed on or a car that can be retaken), it wouldn’t be wise to hire a debt settlement company. These companies usually don’t settle federal student loans. However, you may be able to settle such loans yourself. If you find it hard to pay your student loans, an income-based repayment plan might be effective.
Settlements are often effective if it appears like you won’t pay at all, so you halt payments on your debts. Instead, you visit a bank and open a savings account where you’ll have to make some monthly deposits. As soon as the settlement company feels that the account has adequate money for a lump-sum offer, it will negotiate in your stead with the creditor to accept a smaller amount.
How Much Do Debt Settlement Companies Charge?
A debt settlement company will help you negotiate a new term of your debt or settle your debt. However, they don’t do this for free. Each company charges different fees. It is believed that most companies charge 15% of what you originally owe. Some may charge higher, so it’s left for you to search for the best debt settlement companies that charge less.
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What Percentage Should You Offer to Settle a Debt?
Not everyone likes the idea of leverage debt relief companies. The truth is applying for a debt resolution program with a debt settlement company comes with several risks, such as the risk of your credit score being hurt, the additional fees involved, and so on. If you don’t want to take the risk of using this company, what do you do? How do you settle your debt? You can negotiate with the creditor or debt collector directly! It’s simple. What you need is a little negotiating skills and the right percentage to offer.
When negotiating with a creditor, it is advised that you offer a certain dollar amount that is approximately 30% of your unpaid debt. Of course, you can go a bit higher. However, ensure it doesn’t exceed 50%.
If your negotiating skills fail you and the creditor anything below 50%, you should look at other alternatives like drafting a debt settlement plan or contacting a debt settlement company.
