Saving Money Through Debt Settlement

It is important for any consumer considering debt settlement as a debt relief option to understand how much it will really help them. In other words, you should be asking, “How much money can I actually save with that type of program?” It is important to note that the goal of every settlement program is not simply to save you money. As one of several debt relief options, there are a number of things these companies can address. They can protect you from harassing calls, they can improve your credit report in the long run, and they can eliminate the debt that has been burdening you for too long. But, a lot of the time, due to the particular circumstances the average consumer is experiencing, the main concern is how much money can truly be saved by enrolling into such a program. Essentially, is debt settlement worth it?

I want to first state that debt settlement is certainly not for everyone. In addition, if you are not truly informed as to the entire process and how it unfolds, than I encourage you to search for available literature and fully understand what debt settlement and negotiation entails. With that being said, it can prove to be a very successful debt relief option for most; one that can, depending on a number of factors, save you a large sum of money. Here is a brief overview of some of the factors that determine how much money you can potentially save by enrolling into a settlement program:

1) Who your creditors are. In this particular industry, success rates are determined by the relationship between the creditors themselves and the debt settlement companies. Some creditors, such as Citibank, MBNA, and Discover, are more difficult to negotiate with and are unlikely to settle for anything less than 70% of your outstanding debt. If these are the majority of the creditors you owe, you aren’t as likely to save as much.
2) Your recent financial activity. Cash advances, balance transfers, and luxury purchases within the last six months in particular are very detrimental to the negotiations process. Consider a situation in which a man who owes 20,000 dollars in debt goes to the local Target and charges a 60 inch plasma television for his home. Bottom line- don’t do it. The creditor is going to say, “Why on Earth are you purchasing a plasma television when you could instead pay off your debt?” You aren’t going to be able to settle for a low amount, so don’t expect, if your recent activity includes any of the above, to save much money using a debt settlement company.
3) Hardship status. If there is no evidence of any particular hardship in your recent past that caused you to fall behind or completely miss your payments to your creditors, it is much more difficult for your negotiators to convince the creditors to let you pay off the debt for just a percentage of what you owe. If, on the other hand, you are a cancer patient and have outstanding medical bills to cover radiation treatments, your creditors are certainly going to be more understanding of your situation and you are far more likely to save more money than the industry settlement average.
4) Account status. The best approach when enrolling into a debt settlement program is to make sure you close down all of your accounts. If you leave an account open and continue to make payments towards that account, your other creditors are going to wonder why you can’t make payments towards their accounts as well. Simply put, your other creditors won’t be willing to negotiate for low settlements if they believe you have the income to be making your minimum payments.