Most times, we discover that when we are financially indebted, it gets harder to pay up as the days pile on each other. The first and most obvious reason for this scenario is not usually far-fetched. For low-income earners, or those whose debts are virtually half their yearly income, it would be ridiculously painful for them to pay up their debt. If they do carry on with their good-natured attempt to pay up, they might find it almost unbearable living the rest of the year.
If you have decided to disregard the option of instant repayment, then you might be looking at the repayment option. This allows you pay up little by little over a longer period of time. It sounds okay, until you begin to realize that the more your debts remain, the more the interest on the debts increase. In effect, if you are paying up $2000 for every month, by the end of the month, you might have accumulated an additional $1000. Not very encouraging, is it?
This is where the idea of settlement comes in. If you find yourself swimming in a large debt crisis, you might want to consider this option, too. You will have to open up the channels of dialogue and negotiations with the guys who lent you the money. This approach is double-edged, as if your negotiation attempts fall through, it might make your lenders move in for the kill. They might then realize that you are making moves for settlement – which is actually debt reduction, and in effect, a loss on their side – and they will try to checkmate your move by involving the law in your debt problems.
The use of the debt settlement problem has to be agreed upon by the parties involved – in most cases, you and your lender. The idea is to convince your lenders that since you are financially hard-up, a reduction in the debt owed by you will be the most profitable approach to the issue. Most times, both of you will have to agree on a fifty or seventy-five per cent cut on the original amount. If, however, you fail to come to an agreement with your lender, prepare to face the music!
If you discover you have bungled your attempt at one-on-one debt settlement, then you will have to run fast to a debt settlement company, and let them take up your fight. Make sure the company is a reliable one, as you will only get to do this once. The company, if it is worth its salt, will take up the task of making sure your lender is aware of the fact that you are incapable financially of paying up your debt. It will be succinctly mentioned that any further pressure put on you by the lender will only lead to your pleading bankruptcy – unfavorable for you and your lender. Finally, they will “remind” your lenders that the stimulus package gotten from the government should be handed down the lines to the masses.
In essence, you use the settlement company as a front to bring your lender to his senses. You probably didn’t think of these options. That is why you need a debt settlement option.
Andy Eze is a writer and consultant for CreditCardComparison.com.au. a Free Credit Third Party Reviewer of Financial Products