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Accelerate the Debt Settlement Process

Created: On April 14, 2009 @ 4:12 pm In

One of the most attractive features of the [1] debt settlement process is the ability to eliminate debt without having to increase your monthly payments. In fact, many people pay less per month during the debt settlement process than the minimums required by their credit card company. The use of lump sum payments to help accelerate the process often goes overlooked.

Many [2] debt settlement companies require that you place money, every month, into a settlement account throughout the program. Ultimately, the goal is to accumulate approximately 50 percent of what you currently owe plus any fees being charged by the debt settlement company. During this time, you cease making payments directly to your creditors. At first glance, this can appear very attractive.  For example, if you owe $25,000 in credit card debt with a current minimum monthly payment of $500, you can reduce your monthly payment to $300 and expect to settle in 42 months at $.50 on the dollar.

The above analysis lacks two very important things:

  1. While you no longer make payments to your creditors, your balances will increase from their original amounts due to late fees, penalties, and interest charges. The settlement amount will represent more than 50% of the original amount.
  2. Your creditors will only wait so long to receive payment before exploring their legal options. The longer it takes you to negotiate a settlement, the more likely you face a potential lawsuit.

Increase Success With A Lump Sum

You will dramatically improve the likelihood of successfully completing the [3] debt settlement process if you are able to shorten the time period by accessing a larger sum of money at the beginning of the process.

Options available to most typically include the following:

  1. Sell something. Perhaps you have a boat, motorcycle, or car that you do not need.
  2. Borrow money from friends and family or a retirement account. Consider the consequences of not being able to repay this debt should something happen. Consult with a tax or financial advisor prior to doing anything with a retirement account to understand the longer term impact of such an action.

The more money you are able to raise at the beginning of the process the quicker you will be able to save the necessary funds to settle your debts. Most creditors will be open to working with you through the debt settlement process, however, the longer it takes, the less patient they will become, and the more likely they will explore legal action against you.

About Author:

Chris Rocks is the Regional Director of the National Credit Federation (NCF), a consumer advocacy group that assists small business owners and consumers overcome debt and credit challenges.

Article printed from DebtHelp.com Blog: http://www.debthelp.com/blog

URL to article: http://www.debthelp.com/blog/2009/04/14/accelerate-the-debt-settlement-process/

URLs in this post:
[1] debt settlement: http://www.debthelp.com/debthelp-quiz/
[2] debt settlement companies: http://www.debthelp.com/kc/21-consider-choosing-debt-management-company.html
[3] debt settlement: http://www.debthelp.com/debt-consolidation/settlement.html