The one situation facing consumer’s today is financial hardship. This hardship has been caused by not only the economic climate of losing their jobs or reduced hours to part-time but also by a medical emergency. During normal economic times, the consumer may have struggled to meet their financial obligations. This means maybe only making the monthly minimum payments on their credit cards but they were able to meet their monthly mortgage and car payments on time.
On average, the consumer seeks to pay all their obligations on time and which would ensure a good credit rating. The higher a credit rating of the consumer the more willing the lenders are willing to lend to the consumer. The credit score range from the three major credit report services are from 350 to 800. The average score is in the 700 range for most consumers. If your credit score is in the low 600’s or lower then you are consider a sub-prime borrower. A sub-prime borrower historically will pay a high interest rate on their mortgages and credit cards.
So during these trying economic times, the consumer is not only stressed out because of their job lost but their inability to meet their obligations. The consumer must decide what is best for them and their family. Because of the emotional toll it is taking on them.
After the consumer, has reviewed the various options such as, debt consolidation, debt consulting, bankruptcy, do nothing or debt settlement. They will see that a debt settlement option may be their best method to unburden themselves.
As what is debt settlement? Debt settlement is a managed approach used by a third party company. This company will negotiate on behalf of the consumer to reduce their debt by up to 50% of the outstanding current balance. Basically, the consumer places a set amount of money each month into a “trust account” until approximately half of what is owe on their lowest credit card balance. It is when the debt settlement company will start to negotiate with the lenders. The lenders are more willing to take something on the balances than have the consumer file bankruptcy on them. In a bankruptcy case, depending on the assets of the consumer, normally secured lenders get repaid first then the unsecured lenders. In most cases, the unsecured lenders receive no money from the consumer.
The consumer wants to do the right thing not only for themselves but their families. A debt settlement program can take from 12 months to 48 months to complete based upon the outstanding credit card balances. This program may cost the consumer less than their current monthly minimum payments. It is not a quick fix program but a program that will allow the consumer the ability to repay their debt and repair their credit score.
