Debt may be a necessary part of modern life, but it can accumulate so quickly that a person doesn’t realize how much he owes until it is too late.
As long as a person’s salary is greater than what he owes, this probably will not be a problem. When monthly costs start to exceed the income, however, there’s no way to keep up. Financial experts call this “negative debt to income ratio”.
In order to prevent the situation from getting out of hand and doing irreversible damage to one’s credit rating, a debt settlement program might be a good idea.
Debt settlement companies negotiate outstanding debt and past due bills on behalf of the customer. Usually, unsecured debt must reach at least $7,500 to qualify for this intervention.
Policies, however, may vary. Typically unsecured personal debt or credit cards, these loans are high risk. To mitigate the crisis and avoid bankruptcy the debtor will be asked to contribute money to a pool until it reaches a predetermined amount.
The negotiator will then offer this money to the creditor on the client’s behalf and request that the account be marked as fully paid. The client and the negotiator then repeat this pattern until more money is saved, and the process continues with another unpaid creditor.
Personal loans, medical debt, and credit card debt are handled in a similar way, and most negotiators will work with both types of debt.
The decision to accept this type of assistance can be a smart one, but only if the company is honest and reputable. Any organization that charges exorbitant fees before acting on the client’s behalf should be avoided.
Checking with the Better Business Bureau is a good idea, but it’s not enough in itself. Not everyone who has a bad experience files a complaint, and there may be no record of a shady past.
If any debt settlement company refuses to provide references from satisfied clients, there’s a good chance that they have something to hide. Investigating beforehand is the only way to know a company’s history.
Finding a good organization to negotiate debt may require a lot of time, but finding a trustworthy company will be worth the hard work. It will not only keep the creditors away; it will also protect the client’s credit history, help eliminate debt securely and ensure the ability to borrow money in the future.
For additional money tips visit the Mad Progress Finance section.
Return to the Home Page of Mad Progress.