Do You Qualify for Debt Settlement?
Debt settlement is nothing more than good old-fashioned haggling, where a team of financial experts negotiate with creditors on your behalf to significantly reduce your debts. Debt settlement can slash the amount of unsecured debt you owe – not just your interest rate as is the case with debt consolidation, where you would take out a single lower interest loan equal to your original balance.
Debt settlement offers the financial and calendar flexibility that other debt relief options simply cannot. However, the program is not suitable for everyone. To find out if debt settlement is the right course of action for you, or if you qualify for debt settlement, there are five guidelines you should consider:
Are you going through legitimate hardships that prevent you from paying your bills?
Debt settlement programs aren’t offering a “free lunch” to those who just don’t want to pay their bills; rather, it is an ethical and honest alternative for households that desire to take responsibility for their debt and work with, instead of shut out, creditors.
Circumstances beyond our control can happen to anyone and can subsequently destroy financial security. Legitimate financial hardships are generally caused by income reductions (maybe you lost your job unexpectedly or met with a pay cut), medical issues, and divorce or separation (think alimony, legal fees, child support, and added living expenses).
Are you prepared to commit yourself to completing the program?
When you enter a debt settlement program, you’ll be asked to cease all payments to certain creditors, as they have no reason to negotiate if you’re making the regular monthly minimum payments. Creditor calls and threats may increase; however, if you mentally prepare yourself and are willing to work closely with your settlement team, this aggressive approach can get you out of debt quicker and at a much lower cost.
Is most of your debt from credit cards?
Debt settlement covers unsecured debts, debts that are not backed by assets such as a house or vehicle. Because creditors have no collateral to fall back on when you cannot repay what you owe, they are generally more willing to haggle. Unsecured debt can include medical bills, lines of credit, signature loans, repossession deficiencies, financing contracts, department store cards, and certain monthly bills. However, participants with a greater proportion of credit card debt realize the highest savings.
Are you able to put sufficient funds toward the program each month?
Settling your debts requires you to direct funds to an escrow account, which serves as your bargaining chip. Creditors are more likely to negotiate when they realize you have a serious offer to bring to the table. You should be able to set aside at least 1.5 percent of your original combined debt each month. For example, if you owe $20,000, you should be setting aside about $300 each month. If fluctuating circumstances prevent you from making steady escrow contributions, however, you can always save less one month and more another. As long as you average 1.5 percent over the duration of the program, you should be fine.
Do you have access to additional financial resources?
Though not a requirement for successful completion, external resources, such as a small inheritance, insurance settlements, cash-value life insurance policies, and, perhaps, a loved one, can help you overcome significant debts.
So, do you think debt settlement is the right path for you? If so, take a look at our guide on how to succeed in a debt settlement program and then give New Era Debt Solutions a call at 1-800-527-4421. New Era clients realize, on average, more than a 56 percent savings and achieve financial freedom in just over 2 years – much less than other programs which are designed to take 3 to 4 years. Financial security is just around the corner!