Tips to come out of debt trap

Tips to come out of debt trap

By: Lilly Lydia

People get into debt trap for a number of reasons. In most cases, it is not because they have been reckless or careless. Very often, debt trap is the result of a change in circumstances such as loss of income through job hopping, divorce or separation, illness and other life changing events.

There usually comes a point in every body's financial behaviour when he realises that he has to take some drastic action, otherwise he will never see an end to the phone calls and letters from the people he owe money to. Debt burdens are often increasing on a daily basis with added interest and charges and the repayment of the borrower is not actually reducing the balance.

The Debt Management Plan is a confidential program individually designed to provide the borrower a unique solution for adverse financial conditions. Financial experts assess the financial situation of the borrower; assist in creating a spending plan, and negotiate the terms of debts with creditors. By negotiating terms such as lower interest rates and waived late fees, these plans provide the borrower more affordable repayments and a shorter payoff period. These plans also consolidate borrower’s entire unsecured debts, requiring one convenient monthly repayment.

Benefits of the debt management plan are manifold. The borrower saves money with the lower repayments. The financial institutions dealing in such plans work with creditors to lower monthly payments and reduce interest charges. In some cases, these institutions also re-age the borrower’s account. This action stops late fees from accruing to the borrower’s account. These plans also enable the borrower to have the advantage of One Convenient Monthly Deposit. This program combines all your credit obligations into one monthly deposit. Once your deposit has arrived at the debt management agency, it is then disbursed to your creditors individually.

Debt management plans also offer the automatic deposit service. Through this, the agency can deduct your monthly deposit from your savings account. This service ensures that your payments are disbursed on time, every time. Counsellors for expert financial advice are available 24 hours a day, 7 days a week to help answer your questions or start a counselling session. By opting for such plans, you only pay what you can afford, based on your in-comings and out-goings. You can also track your monthly payments online using the sophisticated technology offered by these agencies. Before you enter into any debt plan with such agencies, just make sure what they will exactly charge from you for rendering their services.

For more information about loans: Debt Management Plan, Consolidation loan , Commercial loan

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Understanding Debt Settlement

Understanding Debt Settlement

By: Dan Delgado

Debt settlement is the term used when we come to terms or agree to pay a portion of a specific debt with a creditor. Before achieving a settlement a negotiation process must take place.

Debt settlement and negotiation go hand in hand, a settlement cannot be achieved without the proper negotiation process. Many assume a settlement is the same thing as a negotiation, it is not, it is just simply the result of negotiation. Therefore when we speak of a debt settlement program, we are simply speaking of a negotiation process. What this means is the term debt settlement program is misused, it should be called debt negotiation or debt settlement service.

We know now what debt negotiation is, lets talk about debt settlement and how it works. Basically a debt settlement service or debt negotiation company is contacted or hired to negotiate settlements with your creditors. These companies will then do their best to keep all collection calls from going to their clients, thus making the creditor work directly with them and not the client. This is done by forwarding the credit company a Power of Attorney Appointment which is signed by the client authorizing the negotiations company to negotiate settlements on their behalf. Once this POA is established, it will take anywhere from a couple of days up to a month, depending on the credit card company being dealt with, most collection calls will then go to the negotiations service.

Meanwhile the client is saving funds on a monthly basis to settle his/her accounts. Depending on the total amount of debt being negotiated on, the client must save a percentage of this debt on a monthly basis. How much should a person save every month? The more the better.

There is a common misconception about debt settlement programs or people are misled to think they will have anywhere from 36 months and up to settle all debt. This is not true. If all accounts are brought into a settlement program and all accounts have the same amount of months delinquency, then all accounts must be negotiated on at the same time. With the exception of some accounts that are better negotiated on not with the original creditor but with collection agencies for greater savings.

Now we know we do not have all the time in the world to settle our debt and that there must be a strategy to settle our accounts, different credit companies dictate at what time of delinquency to deal with them. Who knows this better than your negotiations company? No one.

Most agreements to settle must be funded in a lump sum? Most of the time yes, for greater savings. The lower the settlement agreement (meaning more savings to the client) the faster the creditor requires payment. In some cases multiple monthly payments will be extended to the client. Settlements and monthly payments differ depending which creditor is being dealt with.

Negotiating unsecured debt is not as uniform as everyone thinks it is. Sometimes accounts have to be juggled to reach more favorable settlements in order to achieve the best possible savings for clients. Most of the promises told over the phone when first contacting a debt settlement company fall short of the clients expectations a year or two into the debt settlement program.

Most settlements will take patience, it is an ongoing negotiation and it could take anywhere from a few days to a couple of months to settle a specific account. Usually the faster the negotiation the better. Most credit companies will require financial statements from clients before offering any type of savings on any one account. What this means is if the creditor determines a person makes enough money to continue to pay off their debt, savings will be minimal to none. Be careful if debt settlement is being used as a tool to save money, in order to negotiate settlements most creditors will require a true hardship.

To sum it all up when negotiating settlements, first and foremost, time is limited. Second, there must be funds available to negotiate with. Third, patience is an essential part of the negotiation process and fourth negotiation must be the outcome of a real hardship in order to obtain the best savings possible.

Dan Delgado is an active unsecured debt negotiator, he has experience negotiating personal as well as business debt. For more information please visit http://www.pemperandgartle.com

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