Today’s consumers are overwhelmed with unsecured credit card debt. They are unable to maintain making the monthly minimum payments on their credit cards. The reason why the consumer is seeking some type of debt relief is because they have incurred a recent financial hardship. This hardship has taken the form of either losing their job, reduced hours, divorce, death or a medical emergency.
The majority of consumers want to payoff their obligation either monthly or in full. However they are having a hard time of making ends meet in today economic climate. The consumer is on an emotional roller coaster and is seeking ways to make ends meet.
One of the options that consumers are considering is using a debt settlement company. A debt settlement company is a third party which will negotiate with the lenders on behalf of the consumer. In most cases, a debt settlement company is able to reduce the consumer’s outstanding balances by up to 40% to 50%. So considering that a consumer may have more than $10,000 in unsecured credit cards this debt might be cut in half. The savings to the consumer is monthly interest on their cards and the debt reduced from $10,000 to $5,000.
The consumer is asking, “Why would a lender accept half of the obligation due to them.” The answer is simple. If the consumer files for bankruptcy, historically there is no money available for the unsecured lenders. In other words, the lenders are willing to take something rather than receive nothing on the obligation. If a consumer does file bankruptcy then the lender has to write-off as a bad debt this obligation which affects their bottom line.
Using a debt settlement program is not a quick fix or an overnight solution to the consumer’s situation. However what it does is allow the consumer to save monies into a “trust/escrow” account over a period of time. Normally, this amount is less than what their combined monthly minimum payments are on the debt. The debt settlement company begins negotiation with the lender when at least half the monies are saved against the lowest outstanding debt. An example is if you owe $30,000 on five credit cards and the lowest balance is $5,000, when you have approximately $2,500 in the “trust/escrow” account the company will start to settle with the lender.
Yes, there are drawbacks to using any type of program. However the benefits of using a debt settlement company out weight those drawbacks. Remember if you file for bankruptcy, it will be harder in the future to receive any loans while if the consumer makes the effort to repay their debt. The ability to borrow in the future is brighter. Because the consumer did not walk way from their obligations the lenders are more willing to lend.
Therefore, call your debt settlement expert today to discuss how they can help you.
