How can you settle your debts with the help of a settlement agency?

You obviously have come across advertisements featuring debt settlement as a feasible substitute to bankruptcy or a viable debt solution. Normally, the advertisements contain the following phrases: "Become debt free in less than 6 months" or "lower your debts by up to 60%".

  Like many people who are overwhelmed with a huge debt burden, you might want to know how to settle your dues. When you go for debt settlement, negotiations are carried out with your creditors to reduce a part of your unsecured debts. However, settlement might have a somewhat negative impact on your credit report. Therefore, if you're thinking about debt settlement as an option, you should understand the whole procedure of settling your bills.

How to settle your debts through a settlement agency

1) What should you do? First of all, you contact a debt settlement company and clarify your financial condition to them. They would tell you to provide the names of your creditors and your overall outstanding balance. The settlement company would subsequently let you know about an approximate amount that you would need to settle all your dues. They would recommend you to stop making payments to your creditors and keep on making payments to a trust account. You just need to make a particular monthly payment into a trust account till the account balance comes to a satisfactory level to begin negotiations with your creditors.

2) What would the debt settlement agency do? The settlement agency would usually ask for a fee of 15% for their services. This fee would be deducted from your payments to the trust account. When the trust account gathers sufficient balance, they will begin to contact your creditors and try to settle your accounts with them. Successful negotiations can make your creditors accept an amount, which is lower than what you owe to them. You no longer have to face disturbing collection calls. You can settle your medical bills, credit cards, personal loans, utility bills, gas/store cards and other types of unsecured personal loans through a settlement program. Debt settlement often proves to be a better solution than bankruptcy. However, your accounts are marked in your credit report as "settled" instead of "paid in full". This reduces your creditworthiness to your future creditors.