It is quite a common feature these days for people to have some debt or another – home mortgages, credit card balances, student loans, car loans and so on. Most people manage to keep their finances on track and also pay off their debt. However, there are several occasions when a debt gets out of one’s hand and people find themselves in an untenable situation with too much debt on their head to be paid off. When this happens, it is usually the right time to sit down and figure out a way as to how you could pay off debts. Debt settlement is not the ideal choice but the only way to avoid bankruptcy. This is probably one of the most touted financial solutions that you r financial advisor would suggest to you.
How does the debt settlement process work? What is a debt settlement calculator? All these questions might lead you to perplexity. However, not anymore! Here is an insight in to what debt settlement is all about and how can a settlement calculator be of any help to the debtor.
The debt settlement process
Debt settlement can be described as a negotiated agreement in which a person pays their creditors an amount which is much less than they owe. It is ideally an amount that is preferable to the creditors than a total loss if the customer had to declare for a bankruptcy status. This amount is a percentage of the total minus the late payment charges and the heavy interest rates and is settled upon after lengthy negotiations. It can be a contentious process; however, the end result is always benefitting for both the ends. Once the agreed upon amount is paid, a notation is made in the credit report, marking that the debt has been paid.
What customers should know?
Customers should be aware that not all of their debt is eligible for settlement. Secured debts like the car and home loans cannot be negotiated for settlement under any circumstance. If a person is struggling to pay their mortgage, the home is usually repossessed by the bank and sold to recoup losses. However, on the other hand, the settlement agreements can be negotiated for unsecured debt like credit cards and bank loans. This debt doesn’t have any assets attached for creditors to take and they use means like wage garnishments, settlements or even lawsuits to get what they are owed.
It is in the best interest of a person who owes money to settle with the creditors as bankruptcy is not the best option and favorable in any case. A person who is bankrupt cannot expect any form of financial help from any source for up to seven long years. Debt settlement is a step taken as a last resort before one declares for the bankruptcy in order to get out of the debt and avoid going to the court. Customers should be aware that a settled debt gets marked differently on the credit reports as compared to the debts paid off in full – ideally it lowers the credit score; however, it is a much better option than declaring self as a bankrupt. Repairing credit scores is usually an uphill battle but much better to deal with than a bankruptcy. So, how can a settlement calculator help you?
Well, with this debt settlement calculator, all that you need to do is to plunge in all your debt details pertaining to the credit cards you own along with the interest rates that you are paying – you will be a shown a debt consolidation report instantly.