Get The Facts On Consolidation Debt Settlement
With the amount of debt that many people are dealing with consolidation debt settlement is one the debt relief alternatives being considered
. But there are things you should know before you sign on with a debt settlement service. You may decide that this is not the route for you once you get all the facts.
A debt settlement service does not really consolidate your debts. You can make escrow payments into an account that they will open for you and they will pay the agreed upon amounts to the lender from this account. If you have been making payments on your credit cards, this means you will probably have to stop paying them in order to be able to fund the escrow account. Many debt settlement companies will take fees off the top before they allow the money to accrue for your debt settlement payments.
The sad thing is most of the people that enroll in these programs never complete them and they end up in worse shape than before they entered the program. In most cases, you will still be plagued by collection calls and may even be sued for nonpayment of your account. A few other things that will happen that most debt negotiation services do not go out of their way to make known is settling your debts will ruin your credit. Problem number two comes with the amount of debt that is forgiven by the lender. This amount is considered income and it will be taxable.
You may want to consider contacting a nonprofit credit counseling company before you opt for debt settlement. They will consolidate unsecured debts into one account making only one payment necessary each month. This will not ruin your credit and because you are paying the balance in full, there will be no taxes required. Your interest rates will be reduced to around 10% and your fees eliminated. You will be out of debt in 3 to 5 years.
If you still feel that debt settlement is the best way for you to eliminate your debts, you are much farther ahead to talk directly with your lender than dealing with a third party debt settlement company. You will probably end up paying somewhere between 40%-60% of the current balance on the account. You should be prepared to make the payment within a few days of the settlement agreement. Get all details in writing; get a receipt of payment and a release of debt. Keep these items in a safe place and never get rid of them. There is a good chance this debt may rear its ugly head again and you will be glad you saved these documents.
by: Marjorie Salada
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