Is Debt Settlement an Alternative for you

Today's consumer is facing overwhelming unsecured credit card debt. This debt continues to mount each month even if the consumer has started to tighten their financial belt. In some cases, it may be too little too late.

Debt settlement may be an alternative to trying to work your way out of debt yourself. Depending on the amount of you debt, you could reduce your debt in half between 12 and 48 months. This figure considers the amount of your debt, the number of credit cards and the amount the consumer is willing to put into an "trust/escrow" account each month. This method does have some drawbacks dealing with credit score, available to borrow and possible taxes on unpaid balances. Under a debt settlement program the consumer needs to be willing and committed to working themselves out of debt.

A recent article on MSNBC.com, tells how one family eliminated $106,000 in outstanding debt over a five (5) year period of time. This family used a consumer redit counseling service. The article indicated the counseling service was taking approximately $2,000 from the couple to distribute to their credits. This dollar amount was about half of the consumer's monthly take-home pay. This caused the consumer to take on a second job.

This is an example of paying off the entire balance including interest and all fees. Based upon information provided, this means the couple paid approximately $120,000 over five years. ($2,000 @ month times 60 months = $120,000).

This method may have been the best solution for this couple. You want to congratulate this couple on taking on this task and paying off their bills in full. However, if you compare this situation verse debt settlement. The debt settlement company may have been able to reduce the couple's debt in half from $106,000 to $60,000 and may have been able to do it in less time.
Every consumer needs to decide for themselves which is the best approach for them and their family. However debt settlement should be investigated as an alternative to debt counseling. Even with debt settlement a consumer should learn to control their spending and annually review their financial situation. Some of the debt incurred may have been caused by financial hardship, loss of a job or medical emergency.

Why use a Debt Settlement Program

There are several questions a consumer must ask themselves when faced with overwhelming unsecured credit card debt. One of these questions is "why use a debt settlement company?" Or why not negotiate myself? Or why not seek out other methods? Or why not file bankruptcy.

The answer to the first two questions are a debt settlement company has the means and the experience to negotiate with your lender on your behalf to reduce your outstanding unsecured balances. If you contact the lender yourself, they may be not be willing to work with you or they will make the terms unacceptable for the consumer to agree to or even meet. The other methods are doing nothing and working with a credit counseling company which pays the bills for you on a monthly basis. They do not reduce your debt nor do they normally get the interest rate lower. Bankruptcy is a very serious matter which needs to be addressed with an attorney.

The debt settlement company will establish the dollar amount which needs to be placed in a "trust/escrow" account and will determine how long it will take to reach the first plateau of your goals. This plateau is normally half of your lowest outstanding credit card balance. At that point in time, the debt settlement company will start to negotiate on your behalf. Here is an example:

· Owe $19,000 on 4 credit cards ($3,000,$7,000,1,500, 7.500)
· Currently monthly minimum payments of $2,300
· Divide your debt by 40% for a new outstanding balance of $7,600
· Estimate new monthly payments of $750 (less monthly fees)
· Under new debt settlement plan it will take between 12 to 36 months to payoff

Yes, a debt settlement company does have some drawbacks. However, your financial situation requires some type of action. The consumer needs to investigate all the in's and out's of a debt settlement program and how it will work for them.

If the consumer is committed to using a debt settlement program. Now is the time to call an expert and discuss how they can assist you. A good debt settlement company will explain the entire process with you and a realize timeline for getting out of debt.