Written by: Nick Bregozzo

There are many people who are burdened with excessive debt and see no way out from under the stack of bills piling up on the kitchen table. Calls from collection companies hound them night and day. For those people who feel that the mountain of debt is becoming a burden they cannot bear, there may be a potential solution.

Debt settlement is one way to get out from under excessive debt.…  This is the process of offering a reduced, lump sum payment to creditors as a full and final settlement. With this tactic it is possible to reduce the amount owed by 25-50%. The remainder of the debt is forgiven in the settlement negotiation and the debtor is able to be debt free in one swoop.


The Benefits of Debt Settlement
Debt Settlement can alleviate financial difficulties and pressure caused by excessive debt. Negotiating with creditors to accept settlements can be stressful and exhausting so it may be a good idea to seek professional help.

Whilst creditors are not compelled to accept a settlement offer, it is a persuasive argument for a creditor to accepts a one-time offer if the cost of pursuing the debt outweighs any benefit — especially if the debt has not been managed well up to that point. This is the notion of ”net present value”, that is a dollar today is worth much more than three dollars over 3 years.

An example of debt settlement illustrates exactly how a consumer can benefit.…  If an individual has a credit card debt which is being managed by a professional debt collection company, that total approximately $22,000, the debt collector may want $500 a month as minimum repayments.

The consumer in this case may choose to offer the collection agent $15000 as a lump sum debt settlement.

Other Options
Be aware there are other options available for personal debt management. Knowing what these options are and how they compare with debt settlement is important before making an informed decision.

It is possible to make an agreement with a creditor.…  Let the creditor know of any financial difficulties and they may agree to reduce the payments or lower the interest rate. This works best if the majority of the debt is with one creditor. Though these agreements are certainly possible, a debt consolidation company usually has more success when negotiating with a creditor.

A Part IX Agreement is another method to deal with unmanageable debt.…  With this agreement a compromise is proposed to the creditor which may help the debtor reduce their debt and the creditor receive a percentage of their money in a timelier manner. There are certain restrictions and requirements to be eligible for this type of agreement.

Another option to deal with debt is to refinance property.…  When refinancing it may be possible to consolidate all the loans into one larger property loan; this method is very similar to debt consolidation.

All these options are worth looking at, but debt consolidation may be best for those with multiple loans and several sources of debt. Getting professional debt help will help make personal finances more manageable for the overwhelmed consumer. No matter which method is selected, it is imperative to learn good budgeting skills and keep finances under control.

An Informed Consumer is a Smart Consumer
Before beginning the process of debt consolidation, it is advisable to know exactly what the process entails. Make certain to do some research on all debt consolidation companies under consideration and look closely in the contract for any hidden fees.…  It is essential that the payments be lower after receiving this debt help; knowing exactly how much the monthly payments will be before signing the contract is essential.

It is easier to get into debt than it is to get out of it.…  However, there are potential solutions available to the average consumer that can lead to a happier financial life.…  It is wise to research debt consolidation to see if this type of debt help is the right choice.…  Once the process has begun, learn budgeting skills and work on keeping personal loans and credit card bills manageable.…  Becoming debt free and remaining that way are the two principal goals of debt consolidation.