Many consumers in America find themselves buried in increasingly higher debt and at some point looking for debt help. Their monthly unsecured debt payments are growing in both principal and interest, and they are finding it more difficult to make the monthly payments. As a result, these late payments are impacting their credit score and they are ending up with bad credit.

First of all, let’s talk about unsecured debt and what qualifies for a debt settlement program. The first and most obvious problem for people is their credit card debt. Additionally, past medical bills, payday loans, other unsecured loan not backed by the government, past due rent, etc. can all add up as debt that you cannot get away from. Secured loans such as a mortgage or auto loan do not qualify, nor does student loans.

So what exactly are your options? The first and best choice would be to control your spending, tighten your belt, and as quickly as possible make pay down your unsecured debt. Although its sounds good, sometimes this is just not achievable for many reasons. Bankruptcy laws have changed and it is much more difficult to declare bankruptcy, and it is a stigma that will stick with you for up to 10 years. For most looking to avoid bankruptcy, debt settlement is often a great alternative.

Debt settlement reduces your monthly payment into one manageable payment. That payment gets set aside until you accumulate a large enough chunk so the attorneys can start to settle your outstanding debt. This is usually a onetime payment; typically most of these companies are willing to settle from anywhere between 20-75% of your outstanding balance. The creditor will then forgive the remainder of your balance and most people can typically eliminate all of their debt within 12 to 36 months.

In the meantime it is a good idea to start saving money towards the debt settlement and stop paying your creditors. After you have settled your debts, take advantage of the free credit report you can access every year. Your settled debts will reflect a zero balance, but your history of delinquencies will remain.

It is important to understand that this process will ruin your credit, but if you have so much debt that you cannot make the payments, the last thing you need is to apply for more credit. Or, an even worse idea would be to use credit to pay off debts, only to make your situation worse. Creditors will still call you and try to bully you into paying.

It is important that you notify them that you are in a debt settlement program and redirect their collection efforts to the debt settlement company for quicker resolution of your unsecured outstanding debt.

It is important that you cut back on your spending habits and work your way out of debt. Once the debt has been settled, get into a credit repair program to build your credit back up, a process that will only take you about a year. It is a process, but one that is well worth it.

It’s unfortunate, but the stark reality in the United States is that bankruptcies have increased by an astonishing 40.16 percent during the first three quarters of 2007. This represents a total of 623,399 bankruptcies filed during this period. As if this isn’t bad enough, the news is even worse in the Detroit area, where Chapter 7 personal bankruptcies increased by a whopping 63 percent during the first ten months of 2007.

Troubling as it may be, these facts are not surprising given the current state of the country’s housing market; with foreclosures at an all time high it’s almost expected that credit card debt and delinquencies are also skyrocketing. Because of the credit card situation, so many people find themselves experiencing much difficulty making ends meet. These same individuals have a strong desire to avoid bankruptcy, but they’re not sure what other options may be available to them. This leads many people to closely examine debt settlement, which is somewhat misunderstood. Therefore, if you’re considering this form of debt relief it’s important to learn as much as you can so that you’re able to make an informed and educated decision.

What is Debt Settlement?

Debt settlement (debt negotiation) is an agreement between a debtor (consumer) and a creditor to fully satisfy a debt for a reduced payoff amount. This process typically occurs as negotiations take place between the consumer (or a professional firm hired on their behalf) and the creditor.

Are You a Good Candidate for Debt Settlement?

You may be a good candidate for debt settlement if your debt is simply out of control and you find yourself constantly worrying about this situation. You may even have experienced several nights of lost sleep due to the stress brought on by your lack of ability to make ends meet.

If you feel as though there is no end in sight, and you’re borrowing from one creditor to pay another I highly recommend that you consider debt settlement as a possible solution to end your financial woes.

Please understand, however, that if you should reach an agreement with one or more of your creditors to pay your account(s) off for less than the full balance, funds must be available to pay the agreed-upon settlement prior to the deadline. Some folks access a home equity line of credit for this purpose, while others simply borrow from their retirement fund or a relative. If these options are not available to you, it may be necessary to set aside a reasonable amount of money each month until you are in a position to negotiate a settlement with your creditor(s).

Will Debt Settlement Affect My Credit Score?

If each of your credit card accounts is current, there’s a very high likelihood that your credit score will be negatively impacted. This is due to the fact that creditors will not cancel thousands of dollars worth of credit card debt simply with a phone call. Rather, all accounts considered for debt settlement must be delinquent. Clearly, delinquent accounts on one’s credit report will reduce the overall credit score. Fortunately, with each zero balance reflected on your credit report, your credit score will increase and should be well above 600 within 6-9 months after completing the debt settlement process. For more information regarding your credit score and debt settlement, click here.

Will My Creditors Sue Me?

When credit card accounts are delinquent, obviously creditors maintain the right to take whatever action is necessary in an effort to collect the money owed to them, so obviously there is some potential for a lawsuit. That being said please understand that the probability of litigation is relatively slim. You see, the majority of creditors would very much select to resolve consumers’ past due accounts outside of a courtroom, and avoid litigation altogether. Even though most creditors will not sue, please note that there are some cases where creditors do litigate to collect what is owed them.

If you’re considering debt settlement and would like to learn more, click here.

Using credit cards is the easiest method of doing payments. That is why most of the American citizens have gotten used to it. But, on the other hand, it seems to be more risky, because there is no limit when using credit cards. As a result, people very often get in to debts. People tend to buy whatever they need freely when they use credit cards. But, this will unconsciously make they fall in debts. When you realize that you are in debt, it will be too late to solve it on your own. Thus, in a time where almost all the people are in debt, it is essential to have a fair knowledge on debt settlement options.

Although getting in to debts seems to be natural, in a way it affects your reputation. Moreover this will bring you more troubles which will harm your health as well. The economical and the emotional stress will make you depressed. Moreover you will eventually lose your happiness and even will cause problems in your family. Worst problem is going for bankruptcy. Although it seems to be the sole solution, it will end up with more troubles. You will lose your opportunity of getting any bank loans thereafter. Thus, filing bankruptcy is not at all the sole solution to get rid of debt as long as there are debt settlement companies to help you.

So, in order to get rid of credit card debt, join a debt settlement company, where the company will deal with your creditor on behalf of you. They will negotiate with your creditor and make you pay a lesser amount than spending money on debts. This will be favorable for both the parties. This method of negotiating will make the creditors understand that getting something is extremely better than having nothing at all. Thus, they will probably agree with these debt settlement services, and will eventually make you pay 50% or 60% of your debt.
But, remember almost all the settlement companies are not honestly working on behalf of you. There are some fake companies as well who are waiting to drag money from the innocent consumers like you. Thus, be clever and visit a debt relief network where you can get the best and the accurate information regarding the debt settlement companies or services.

The phone rings and it’s yet another creditor wondering when you are going to make a payment on your past due account. This is really getting old for you, but what are your options? You have a ton of debt and are going further down a financial hole every month, where your bills are starting to become more than your net income.

You may have thought about filing bankruptcy. Don’t do it. Bankruptcy should be your last possible resort option, not one that you seriously consider until you have thoroughly investigated all other possible options.

More and more people who are finding themselves in this situation with the sad shape of today’s economy. Things may look brighter for the future, but to get to the “future”, you need to successfully get through the present first, hopefully without doing severe damage to your credit report before you get to that “future”. You may have considered a debt consolidation loan, but the downside of that is that it is yet another loan and you are pretty much borrowing from Peter to pay Paul, and the interest rate that Peter is charging is going to be sky-high if you have been having financial problems for awhile since that fact will be reflected on your credit report.

Although it may sound like the same thing, you may want to consider debt consolidation services, which is different from a debt consolidation loan. With this type of service, you turn all your bills over to the debt consolidation company and they work with you to establish a budget that you can live with. It is not another loan and it is not bankruptcy, so your credit report is not going to suffer nearly from the long term damage that a bankruptcy filing would have on it.

What happens is that you make monthly payments to the debt consolidation service company and then they distribute that payment to your creditors. It is crucial for you to note that if you miss the payment to the debt consolidation company, then they will not make a payment to your creditors, which is going to put you in an even worse situation than you are now, so make sure you make that payment every month.

On your behalf, the debt consolidation service works with your creditors to lower your interest rate, reduce your payments, and sometimes can even get all those pesky late fees waived or reduced. The end result for your benefit is that if you had, for example, $2700 a month going out before to make payments to your creditors, your payment to the debt consolidation company might only be $1800. These are example figures but the point is that your monthly output is significantly reduced, which should give you the financial breathing room you need while you get your financial house in order.

Seriously consider a debt consolidation service and allow yourself to get back on the right financial track, and even be able to answer the phone again and have it be someone other than another creditor!

With so many government programs being passed in recent months, it’s quite likely that you’ve started to hear about credit card debt help from the government. However, you may be wondering if it is real. People who are in significant debt have probably received solicitations encouraging them to use a particular debt relief program. What exactly is being offered and can it help your situation?

The Scoop on Government Programs

There are definitely government sponsored programs that are being put into place to help Americans get out of debt. While you can probably feel confident that these systems will do what they claim for the average user, they really don’t offer a lot more than what you can do for yourself. By calling your credit card companies yourself, you can usually receive an offer to settle credit card debt for about 40% of what you owe. Because there is no middle man, you will not have to pay any fees or accompanying costs. With government options, they will take their cut like any other company would.

Is It Any Different Than Other Settlement Programs?

Using a government sponsored program doesn’t really offer you any advantages over standard debt settlement companies. The creditors are being encouraged to balance books in any way that they can and they will talk with the settlement company of your choice just as readily as a government agency. Also, most consumers are well aware that the government isn’t known for efficiency. A dedicated business, on the other hand, can not function unless it does things right.

What Other Help is There?

Besides using a credit card debt help that is directly sponsored by the government, there are several hidden advantages to the central involvement in financial affairs. First, because of bail out plans, every creditor has a distinct incentive to cut you a deal by the government’s encouragement. There also may be grants that are available that can be used to pay off consumer debt. However, they aren’t listed as such and you’ll need to search deep to find those opportunities. Finally, the government is attempting to invest in the economy and create jobs and that may lead to less consumer debt overall, if the plan is effective.

What Can I Do On My Own?

The good news is that you aren’t at all limited to the options that are being put forth by the federal government. You can still create and implement your own plan. This may include using your own middle man to negotiate payments and settlements. With enough persistence, you can also deal directly with the credit card companies and get good results from those efforts.

There are definitely real options that the government is offering for credit card debt help. However, they aren’t necessarily better or more lucrative than other readily available methods that you can take advantage of.

Credit card debt settlement is where you contact your credit card companies and negotiate to literally pay pennies on each dollar owed to them in one lump sum, hence the settlement. So how do you do so to your advantage?

In this case you may decide to sit down with a debt consolidator and go over the exact amount of money you have to work with and the amount of credit card debt you have to pay off. This may work well with a debt consolidator or a credit counselor as they can sometimes negotiate more of a deal for you.

However, if you decide to go it alone and try to work out the best deal for yourself then you want to make sure that you get the deal that you want. Remember that you do have an advantage here as you have what the creditor wants and that is money.

The main thing is not to give in when they give you the first no. Stay calm cool and collected and above all don’t get angry with them as this will get you no where. Make sure to try to do your negotiations in writing so you have a paper trial to back up what they have agreed to.

So how much do you offer?

Let’s take a look at how much the collection agencies really make off of your debt. For debts that have recently been charged off, they get 6 to 7 cents on the dollar. For accounts that are a bit older and have been at a few collection agencies, they get 1 ? to 2 cents on the dollar and for accounts that have been around for years, they are going to get 1 cent.

So you see, it is not hard to get the deal you want with a credit card debt settlement. Just make sure you stay calm and collected and never raise your voice and you will be sure to keep the upper hand.

* Source: Sean McVity, portfolio broker at Keefe, Bruyette & Woods.

With this in mind, you should always start your offer at 25% or less.

Let’s understand the math here. If your debt is $1000, let’s say at the most, the collection agencies has paid or will collect 7 cents on the dollar, or $70. If you offer them $250 (25%), they are still making a profit of $180. Remember, the credit card companies are out of the picture at this point. This money goes directly to the collection agencies.

In part two of Learn How Credit Card Debt Settlement Can Work For You we’ll look at other things you need to know for your negotiation.

Credit card consolidation is the process of transferring all your credit card debt to one card with a lower interest rate. This process can help save you money on interest and finance charges, and ultimately help you get out of debt sooner.

How’s it Different from a Credit Consolidation Loan?

A credit consolidation loan is a loan you get from a bank or other financial institution. You use this loan to pay off other non-secured consumer loans and credit cards.

These loans can be secured or unsecured. A secured loan will provide you with a lower interest rate because there’s collateral, like a vehicle or house, that the financial institution can take from you if payment isn’t made.

There’s some disagreement among financial advisors as to whether it’s good practice to get a secured loan to pay off credit card debt. If you have the assets to get a secure loan, then that choice is entirely up to you. Banks and financial institutions may be more comfortable giving you a lower interest credit consolidation loan if they feel that their financial behinds are covered in the event that you don’t pay.

Credit consolidation loans are not practical for everyone. They should only be used if you’re having difficulty making your credit card payments through normal budgeting. They’re a great way to reduce your debts, but in order to prevent further debt you’ll need to completely change your spending habits.

Rates for credit consolidation loans vary. They will ultimately cost you less money each month since you’ll be making one payment to one creditor instead of several to numerous creditors. Try to get a fixed interest rate so that your payments don’t change.

Some banks charge a small service fee to set up a consolidation loan. The same is true for any company specializing in such loans. Be wary of a company that makes grandiose promises about permanently reducing your debt. Also be cautious of companies that charge you a consultation fee or large commission to reduce your credit card debt.

A consolidation loan will not usually have a bad affect on your credit rating, but be sure all the loan procedures are explained to you before you get it.

Debt Reduction with Credit Card Consolidation

If you’re not interested in getting a credit consolidation loan, you can reduce your monthly credit card payments by consolidating all your balances to one low-interest card.

Credit card consolidation may also be the your only option to reduce credit card debt if you don’t have the assets to get a secured low-interest loan.

While low interest credit cards or cards with zero-interest introductory periods can help you manage overwhelming credit card debt, they will not provide a magic solution to your debt problems.

Chris Viale, general manager of Cambridge Credit Corporation, a non-profit credit counseling agency in Agawam, Massachusetts warns about the dangers of these low interest or introductory zero-interest credit cards. Viale points out that “you’re getting symptomatic relief, not a credit cure.”

According to Viale’s statistics, 70% of Americans who use credit card consolidation (as a loan or credit card balance transfer) to pay off their credit card debts end up with the same or higher debt loan within two years.

This is not to discourage you from getting a credit card with a great promotional offer. Most people find themselves back in debt because of poor financial planning and unrealistic expectations and not because of the card itself.

When you apply for any new credit card, do so with your eyes open. Companies that offer a zero-interest introductory period are only doing so to entice you to switch to their card. You will be required to pay interest on your balance sooner than you may want to.

These cards can work for you, but to make them work you need to be disciplined. You’ll need to stop charging purchases to your credit card. It’s also a good idea to make double payments to make sure that you’re paying the principle.