Friday, October 1, 2010

Guest Post: Reduce Your Debt By Settlement

If you negotiate with your creditor then you can reduce a partial amount of the outstanding balance. Settlement companies are at the service of the debtors to reduce debts and make the payment plan affordable. At least 40 to 60 percent of the total debt is reduced.

Before you plan to file bankruptcy find out whether you can settle your debt or not. As filing bankruptcy not only hampers the credit score but also ruin your financial career. Therefore it would be advisable to try other alternative other than bankruptcy in order to reduce your debt. As the impact of filing bankruptcy remains on your credit report for 10 years, within these years you might face difficulty to acquire loan.

It would take 1 to 2 years for the entire process of debt settlement and for you to get out of the trap of debt. On your behalf the debt settlement companies would contact the creditors in order to negotiate your debt. After you are being represented by them the creditors usually do not contact you. As the creditors can see a fine ray of hope to get back their money after debt settlement so the creditor harassment is at a halt.

Debt settlement works:
You have to sign a legal paper with the debt settlement company that is known as the "Limited Power of Attorney". A contact needs to be signed by you and make a monthly payment that would be deposited into the "Settlement Account". This money would be distributed among the creditors by the settlement company. Once the payment has been made the clients can unburden themselves from the torment of debt. In this way you can get rid of debt without ruining your credit history.

Advantages and disadvantages of this program:
What are the advantages of debt settlement program?
1.As a part of your debt is wiped out after settling it so debt settlement is considered to be an effective process. In this way you can fix your monthly budget and the repayment plan would also become convenient for your pocket.
2. If you enroll with a debt settlement program then the interest rates along with the penalty charges on the outstanding balance would be negotiated by the debt settlement company. They make monthly payments affordable for the debtors.
3. After the enrollment with the debt settlement program the over limit fee would be eliminated.
4. Debt Settlement Company is a preferable option to eradicate the burden of creditor harassment and threatening phone calls. In order to achieve a debt free life you need to enroll with a debt settlement program.

What are the disadvantages of the debt settlement program?
1. Your credit report would be hampered if you enroll with a debt relief program. Before you enroll with this program you have to be a defaulter in order to reduce and get rid of debt. If you fail to repay on time in case of credit card debt then that might have a negative effect on your credit score.
2. As the balance is settled by negotiation so it is considered under taxable income.
3. You need to follow a disciplined payment plan if you miss any one payment then the settlement plan would not work.
You can boost your credit score once you have paid your account in full. You can secure your financial future by unshackling yourself from the torture of debt.

Author bio:
This is a guest post by Kevin Craig who is a financial writer. He has helped lots of debt burdened people with free counseling and advices on many finance related topics. If you are interested in writing a guest post, please contact PF Stock at the Email address listed in the sidebar.

Disclaimer: The information provided here is not meant as tax or debt settlement advice. I encourages readers to consult with an attorney or financial adviser if they have specific questions about debt settlement.

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