The dos and don’ts when it comes to debt settlement

Having credit card debts that you cannot handle anymore is definitely stressful and challenging for everyone in this situation, but no matter how complex and big the problem is, there is always a solution to it. This is the reason why most people who cannot pay off their debts anymore resorted to the services of debt advisers to help them find the best solution to match their needs. One popular solution is debt settlement, which means that the creditor agrees to pay them less than what you owe them. Here are the dos and don’ts you should keep in mind when it comes to debt settlement.

Do – be ready to show creditors your financial cards

When meeting the creditors, you have to be ready to present them documentation of your assets, income and other existing debts, since they need proof of your hardship. This is their way of making sure they offer the settlement to a person that truly cannot pay the entire debt and is not looking for a method to save some money.

Don’t – overlook the consequences

Even though you manage to close the deal and settle your debt, you should still expect some consequences, since the debt settlement can have a negative impact on your credit score and on your ability to borrow more money in the future. In your credit report, there will be listed the fact that you paid your debt for less than the amount of money you owned the bank, which is a sign to future creditors that you did not manage properly to pay off your debts.

Do – be proactive

It is not recommended to wait until the account has already been charged off, since this means that you are more than five months behind with your payments. Contact the creditors as soon as possible, since the sooner you talk to them about this aspect, the more willing they will be to discuss to you about debt settlement.

Don’t – make promises you are not sure you can keep

Another important aspect to keep in mind when settling your debts is to avoid making any promises you are not entirely sure you can keep. If the creditors agree to a specific debt rate for you to pay off, make sure you can manage it financially. It is recommended to set a plan that is realistic and to talk about this with the creditors the moment you are settling the debts. Many people set up a rate that they can only pay for a few months and then they have to default, since they cannot afford this rate either anymore.

Do – make sure the matter is properly settled

You managed to convince the creditors to resort to debt settlement, but now it is important to make sure the matter is actually settled. It is advisable to check your credit report to see whether the settlement shows up written off in the report.

As you can see, these are some great tips you should definitely take into account the moment you convince your creditors to settle your debts.