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Debt settlement can make your debt affordable by allowing you to pay only a partial amount of what you owe. The creditor agrees to accept a lump sum payment in exchange of a partial loan payment. The creditor will try to get as much as possible back from you because they know that you can’t afford to pay back the debt in full. The creditor is more likely to reach a settlement if you are delinquent on your account for many months or the bank has already delivered your account to the debt collector.

The best time to get a debt settlement is when you are already behind in your payment because it will have least impact on your credit score. Those who are current on their payments and apply for debt settlement will experience a significant drop in the credit score. Many people have had a large amount of debts cleared this way. With debt settlement, you can settle your debt and attain freedom from your debt a lot of sooner.

When you enter into adebt settlement program, you have to make a monthly payment to an escrow account. They will contact the lender to negotiate the settlement when there is enough money in the escrow. They probably will ask you to keep sending payment into the escrow account for 3 – 6 months. If you already have prepared the lump sum amount, you don’t have to make payment to an escrow account every month. The account administrator is the one responsible for transferring the funds that have been accumulated as the lump sum for the creditors. Once the debt is settled, your account will be reported as paid as agreed on your credit report. You can click here to find out how you can be freed from debt by joining a debt settlement program.

Hiring a debt settlement company is better than trying to reach a settlement with the bank by depending on your own effort. They are not supposed to charge you any fee until they reach a settlement with the creditor. The fee is charged in the form of a percentage of your original debt or the debt that is forgiven. A legitimate debt settlement company will never offer guarantee to reach settlement agreement. You can always refer to the BBB to find a professional debt settlement company that is reliable.

The debt settlement company must be established and be a member of the TSDC and Better Business Bureau. It is required that the debt settlement company holds an appropriate license and bonds. During the initial consultation, make sure you ask them to disclose all the fees and give you an estimate on how long you have to wait until they negotiate with the creditor.

The debt settlement company can give you an estimate of the result but they should not guarantee the settlement amount that they can get the creditor to agree. They must let you know the amount of money that you are to save up before they will approach the creditor to negotiate the settlement. The policy must be easy to understand and you should go through all the resolution offers to give the approval.