Important Note – Credit Impact

Your credit will see a significant impact when settling debt; this is due to stopping the monthly payments to your creditors, which is necessary in order for your creditors to be open to settling.

If you’re experiencing the ‘treadmill effect’, which is when you’re in a cycle of making minimum payments and still having to use your credit due to not having enough cash to pay for living expenses, then you may already be experiencing an impact to your credit.

Since settling debt results in paying less than what is currently owed as a balance (not even accounting for the high fees & interest), it is common for consumers to experience an easier time rebuilding their credit due to the Credit Utilization being lowered.

Be sure to consider as many factors as possible before pursuing Debt Settlement.

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Which Debts Can Be Settled

It is important to note that settling debt only applies towards unsecured debts, which means that there cannot be any collateral or property attached to the debt. In other words, the most common debts to settle are either credit cards and unsecured loans.

While you do not have to settle all your debt, it is more effective to group together as much unsecured debt as you can when settling. The reason for this is due to the impact to your credit.

Once you know which accounts you’d like to settle, the next step is to gather the most recent statements and make sure your creditors’ policies allow settlements.

Creditor Policies

Being able to settle debt relies on your creditors having policies that allow them to do so; without these policies, creditors can simply demand the full amount owed and even take legal action to pursue the debt.

This is why it is crucial to do research and prepare accordingly prior to attempting to settle debt, whenever possible.

The list of creditors that do not settle is fairly limited. Thankfully, most major banks/lenders are open to settling since they expect most consumers to get back into debt with them at some point again.

Even if your creditors are not willing to reduce the amount owed to settle a debt, if you are in a financial hardship then you may still have options to resolve the debt fairly with some help.

NOTE: Make sure your creditors have a history of negotiating and settling debts before continuing further. You do not want to potentially upset your relationship with your creditors if they do not have policies in place to offer you settlements.

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Debt Settlement Savings Plan

Now that you have a list of your unsecured debts that are eligible for settlements, you can begin putting together the Savings Plan that is going to tell you approximately how much money you’re going to need to set aside in order to settle your debts with each creditor.

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