When you are juggling to make ends meet or, worse, repeatedly try paying back overdue debt- you know why the struggle gets real, especially at that point. It’s a bitter truth that money doesn’t grow on trees; the good news is that you don’t even have to wait for Godot, for something like that you probably will never see.
In spite of losing heart for the fact that money won’t bloom miraculously, it’d be wise to look for an option that can stand as a sure shot solution for the debts that are continuously piling, one after another.
Are you stuck in a nasty debt trap? Don’t let growing debts become ridiculously powerful to get you weak in the knees. Dig right into the best debt settlement program Texas. It will surely brush the burden off, paving the way for a healthy financial state. So, what are you waiting for? Keep reading to know everything about the ins and outs to make things work out via debt settlement.
The Basics of Debt Settlement
Debt settlement programs in Texas, most commonly referred to as debt negotiation, involve wiping out debt by paying a portion in one lump sum. This sum is much less than what you owed.
For the borrower, debt settlement offers much-needed financial relief while helping rebuild credit. Usually, debt settlement involves money you owe to credit card issuers, rather than any other type of debt. But you may manage to settle other unsecured debt as well.
How does Debt Settlement work?
Here’s what the process looks like when you spot on Texas’s best debt settlement program.
- Research debt settlement companies. A growing number of legitimate debt settlement companies ought to be fully licensed and insured. Debt settlement companies, like any other, are expected to keep tabs on industry regulations that are rolled out to protect consumers and their money.
- Be cautious. Before you tick away any debt settlement firm, it’d be wise to be one foot forward in your research. It’s always better to stay safe than sorry. Once you are out and about, especially when digging, make sure you do have a look at the websites of your Better Business Bureau, your state attorney general’s office, and consumer protection agencies, including the federal Consumer Financial Protection Bureau (CFPB).
- Ask about costs. Usually, debt settlement companies charge approximately 15% to 25% fee to settle down your debt; this could be a percentage of the original debt amount or a percentage of the amount you’ve consented to pay.
- Check your finances. Debt settlement companies need you to lay money into a special savings account for approx. 24 months or longer before the debt is settled. These payments draw towards the lump-sum amount. In some cases, you may face difficulties in keeping up with these debt-related payments. Therefore, you might give up on the settlement agreement before settling the debt problem. To ensure this doesn’t happen, go through your budget to check if you can afford debt payments for approx. 24 months or more.
- Nail down the details. Before counting on any debt settlement company, make sure that the picture about the timetable and the fees is clear in your mind. Also, make sure that you ask how many of your initial payments will go for the company’s fees and how much money you’ll be paying overtime.
- Know the tax consequences. The IRS views any forgiven unpaid debt as taxable income, usually if it rises above $600. For example: If you settle a $10,000 debt for $5,000, the $5,000 that was forgiven will eventually be taxed.
The Risks Of Debt Settlement- How to Escape it Wisely?
Debt settlement can be good or bad, and how it will turn out for you, mostly depends upon your situation. Here are some potential risks related to debt settlement and how you can ward them away.
Sailing Ahead Negotiation Problems
The bitter truth is that the creditor may reject the settlement offer. There might even be a scenario where you’ll be forced to catch hold of the original creditor to see whether you can make a payment plan work accordingly. In the worst-case scenario, you may end up owing more than you did at the initial stage, and a rejected settlement offer might drag you toward bankruptcy. Therefore, you and the debt settlement company will have to submit a counteroffer to roll the balls and reap the desirable benefit.
There might be a case where fees to a debt settlement company or even fees and interest charged by an original creditor could build up and flare up to hundreds or even thousands of dollars to your debt. If you don’t want to live this nightmare, it’d be wise to take notes of every important detail by choosing the most reliable debt settlement programs in Texas.
Negative Impact on Credit Score & The Best Course of Action to Reverse It
Settling a debt can lay an onus of impact on your credit score. The balance will be dragged to zero when you settle an account, but your credit report will present the account was settled for less than the total amount.
Settling an account instead of paying it in full is seen as negative because it implies that the creditor agreed to take a loss in accepting less than what he or she owed.
This is where key steps to improve credit score come into notice. If you are wondering how to start, then the first step is to bring any past-due accounts current.
More key tips for building and maintaining good credit scores involve:
- Be sure that you make all payments on time as we advance
- Cut down balances on revolving accounts.
- Enroll in Experian Boost.
- Keep a vigilant check on the risk factors it entails.
Next Steps if You Are Willing to Move Forward With Debt Settlement
If you want to move forward with debt settlement, make sure you are fully prepared to implement the best course of action when it impacts your credit. For example, how low your credit score can fall, and how long will the debt settlement stay on your credit report? And how much will the debt settlement company charge for negotiating with your creditors?
In a Nutshell
Debt settlement is no less than a friend in need is a friend indeed. If you think that debt is trying to spoil the best in you, buckle up before it succeeds.