Is Credit Really Your Friend?
If you’re like most people you’ll find your mail box full of pre-approved offers for credit. Visa, gas cards, department store cards, even personal loans; millions of these offers go out everyday to consumers.
Now you have a visa credit card with a $10,000 limit. You have credit cards from Macy’s and Nordstrom’s. You even get a personal loan from your bank. You feel empowered with all that buying power, but wait! Do you know what happens when you use all this empowered credit? Yes, it turns into debt, and debt depletes you of power. Furthermore, the abuse of debt becomes a nightmare.
When Debt Takes Control of Your Life
The burden of debt is horrific. You can’t sleep, you’re stressed, you can’t think clearly. The emotional side of debt can spill over into physical manifestations. At this point you are really in trouble because your capacity to make money becomes impaired – this is what can happen if you let debt take over your life.
Debt Settlement as an Option
What is debt settlement? Debt settlement is where you, the debtor, gets together with your creditors to negotiate a mutual solution to your debt problem.
There are two requirements to qualify for this option.
1. You must prove that you are incapable of paying your obligations.
2. You must have disposable income after budgeting for fixed expenses.
If you don’t have a budget, make one. Your creditors want to see proof that you are in financial straits. Once they have a clear picture of your situation, they will be inclined to negotiate a settlement agreement. Your leverage comes from the fact that if you file bankruptcy, your creditors will likely get nothing. So, negotiating to get something is better than nothing.
There are three things negotiated in debt settlement, they are:
1. Interest rates
2. Terms (length of loan)
3. Reduction of principle
You will get more latitude with items one and two than you will with item three.
Knowing where you stand is the key to successfully negotiating with creditors. You must make sure your budget is accurate and before you approach your creditors, make sure you know what you can afford to pay them.
If you’re deep in debt, reducing the principal you owe will be the area of contention. Your creditors will be fighting for every penny they can; to be expected, but you already know what you can afford – this is your edge.
Negotiations can be emotional, and some people find that hiring a professional debt settlement company is in their best interest. A third party, such as a debt settlement counselor, can negotiate better terms because they know how the process works. In some cases they even have good working relationships with creditors; this always helps.
In the end, both debtor and creditors have to agree on the settlement package, or else it won’t work.
Debt settlement is one of a few options you have to deal with debt. The worse thing you can do is nothing.
Don’t let debt control your life – control debt by finding solutions, not excuses.
Featured image by http://dribbble.com/chrismorrison
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