Effective Financial Solutions
If you are one of the many consumers who owe more on credit cards and unsecured debt than you are able to pay, it may be time to ask yourself, “How do I get out of debt?”
How Can I Get Out of Debt?
The first step to get out of debt is to determine how much you really owe. This will probably be the most difficult part to confront – how much debt do I actually have?!?! When I ask potential clients this question they often reply “hmmm…well… gosh, I don’t really know.”
In order to determine this accurately, you will need to locate your most recent statements. If your account is already past due, your account could have been turned over to a collection agency. In this case, the statement you received may be from a collection agency as opposed to the original creditor. Whatever the amount is, you want to know your starting point and gathering up these statements will give you just that.
How Much Am I Willing or Able to Pay?
Now you have your statements in front of you. You know how much you owe, but how do you get out of debt? We are at step number two: You will need to decide how much of that total amount you are able and willing to pay. In order to determine this, you will need to know what your actual monthly income and expenses are.
My suggestion is to go through your bank statements and categorize your monthly expenditures. If you are like most, you will be amazed at what you find you are spending money on! In fact, you may get some relief just knowing where your money is actually going each month!
Clients regularly find they are spending money on items that they are getting no real benefit from, such as a new t-shirt or outfit that they “just had to have” or they were not managing their time well and used their credit card for “take out” several times a week. These types of impulse purchases can be reduced and free up literally several hundred dollars per month.
Now look at your NET income. What is the amount that you take home after taxes? Compare your income to your expenditures. With this information, you will now have the amount you can afford to pay each month to settle your accounts.
The Lender’s Viewpoint
It is the collection agent’s job to obtain the maximum recovery of funds for the creditor. The collection agent is working for the creditor. His allegiance is to the one who signs his check – it’s a survival point for him.
At first this may sound like an obstacle, but it is actually to your advantage. Often their first offering is much higher than their bottom line. A professional debt negotiator will work with your creditor to obtain the highest possible settlement available within the terms that you have agreed upon.
A professional debt negotiator will convey your situation to the agent properly, and work with the agent to obtain maximum results. He knows that if they can come to an agreement, the creditor will get paid and in return the debt negotiator will have a happy client!
NOTE: When you work with a debt settlement company, the debt settlement company works for you, not the creditor. A good debt settlement company will have your best interest in mind, not the creditor’s and will therefore, in most cases, be able to provide a great settlement on your behalf.
A Compromise
What your debt negotiator is looking for is a compromise. By definition, a compromise is where each party gives up a little, while maintaining other points in order to come up with an agreement. It’s not a one side gives all and one side takes all situation. This is important to keep in mind when working with your creditors. I have seen BIG mistakes on this one point alone.
Here is an example of a typical compromise: the creditor is willing to accept 50% of the debt, or $3000 in a lump sum payment. This sounds fair but unfortunately you don’t have that kind of cash!
However, with your debt settlement company’s help, you have managed to save $1000. Your debt negotiator may be able to work out a compromise where the creditor still agrees to accept the 50% with the $1000 down payment and the remainder in payments. This is a compromise.
What Is the Average Debt Settlement Percentage?
When you work with a professional debt negotiator who negotiates an account on your behalf, you can expect to pay between 40% to 60% of your total debt.
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There are occasions where creditors are willing to settle for less, but they are not as common. Your professional debt negotiator will have the expertise to know what settlements are typically available.
Some creditors will accept monthly payments at a higher percentage. But for the maximum reduction, you will be expected to pay the reduced amount in full in a single payment. Again, a professional debt negotiator will have the expertise to know if these terms are available to you.
Get the Agreement in Writing
Once the final negotiations have been completed, a professional debt negotiator will always obtain a copy of the settlement agreement in writing prior to making any payment. This agreement will lay out the exact terms as they are understood by both parties.
NOTICE: A payment should never be made on your behalf to a creditor without the agreement in writing!
Keeping Records of Your Settlement
A professional debt negotiator will document the processed payment for you and maintain accurate records on your behalf.
A professional debt negotiator will maintain settlement records, i.e., original settlement letter and valid payment processing for proof of your settled accounts.
Don’t Be Intimidated by Creditors
The debt negotiation process can be intimidating for many consumers, especially if you don’t have knowledge of the ins and outs of debt settlement or what a reasonable offer is.
As you consider debt settlement offers, remember, lenders would rather settle with you than lose everything. They are often willing to settle for less than their initial offer. A professional debt negotiator who knows how to negotiate will work toward the lowest possible settlement.
However, don’t be unreasonable. If you are unsure of an offer, sleep on it. Tomorrow it may sound better to you, especially if you are having a particularly bad day today due to several calls from creditors or your boss at the office seemed to be particularly unruly for some unknown reason!
How Can We Help?
As you consider debt settlement, you may get better results if you use the services of a debt settlement company. Effective Financial Solutions has over two decades of experience dealing with creditors and the knowledge of what your creditors are willing to accept as settlement.
And one more note, when you enroll with Effective Financial Solutions, your attention isn’t on your creditors, that’s our job- your attention can be where it rightly belongs- on increasing your income so you can get out of debt faster!
EFS can negotiate with your creditors, and relieve the stress of the never ending cycle of credit card debt payments!
Contact EFS today for a FREE consultation!
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Effective Financial Solutions does not provide legal or tax related advice of any kind. Individual results may vary.