Now, you will get these incredible settlements where the percentage is 7%, which was one we got for a $35,000 debt, but those are very, very rare.

BANKS AND CREDIT CARD COMPANIES CASH-FLOW

Part of the settlement percentages have to do with the cash-flow needs of the banks and credit card companies.  If they are cash light, they may be willing to settle for a lesser percentage.  For instance, Citibank is having a hard time and they are now more willing to settle credit card debt for about 20% less than they had before.

MBNA use to give good settlement percentages, then in 1999, they settled for around 60%, but more recently, they have lowered their settlement percentages to around 40%.

EAGER SALES PEOPLE

I give you this information so you know ahead of time what to believe from the sales person.  Sometimes, it is popular to talk about the 1 credit card that settled for a very low amount and act like that is the norm of the banks and credit card companies.  It is not.

Just beware of the eager sales person and know ahead of time what is true and what isn’t.  Then, you can better judge the Debt Negotiation company.

Here are the 4 steps for someone who is over their head in debt and yet does not want to file bankruptcy. (Or, nowadays, with more stringent restrictions on bankruptcy filings, cannot consider bankruptcy).

1. Stop Payment to Creditors: Instead, your monthly payments will be sent to a trust account where they will accumulate.

2. Say Goodbye to Collection Calls: You no longer have to deal with harassing calls from credit card collection agencies, as the Debt Settlement agency will take over that responsibility as part of negotiating your debt down.

3. The Professional Negotiation Process: As your payments start to accumulate in your trust account, the debt negotiator has some leverage to work with the credit card companies to forgive a portion of your debt and settle the account for less than what is currently owed.

4. Debt Reduction: After going through the debt settlement process, and not being able to intimidate the credit card holder into paying all the interest and fees, the professional debt negotiator reaches a settlement with the credit card issuer that is typically about 40-60% less than what was originally being demanded by the credit card companies.

This process takes time as the Debt Negotiator continues to work with the various credit card companies to maximize the amount of debt that is forgiven. By working for many clients, the Debt Negotiator has a keen insight into how far he/she can negotiate down your final settlement.

Once one debt is completely settled, the negotiator continues to negotiate an optimal settlement with another credit card, based upon the available funds in the trust account.

Depending upon the extent of debt, and the amount of payments going into the trust account, the settlement process may take 1-3 (or more) years.

Since most professional Debt Settlement firms are paid a commission on how much they reduce your debt, they have a vested interest in reducing your debt as much as possible. In other words, the more money they save you, the more money they will make (but the net result is an overall lower cost to the debtor).

To learn more about the details of debt settlement and find out if your circumstances qualify for debt negotiation services, click “Contact Effective Financial Solutions” for a free and no-obligation personal debt consultation.

Four Benefits of Debt Settlement (or Debt Negotiation)

1. Avoid Unfair Collection Practices: Getting an a professional Sebt Settlement service working for you will go a long way towards avoiding unfair collection practices and harassment by debt collectors. They know the rules of the game, including the ways that debt collectors bend (and break) the rules to violate your consumer rights.

2. Eliminate Extra Charges: Perhaps you’ve racked up a number of late payment fees, over-the-limit fees, excessive interest charges, etc., on your credit cards and/or other unsecured debt. A professional Debt Negotiator will work on your behalf to eliminate much or all of those fees (typically more than an individual can do on their own).

3. Make Single Payments: A component of getting out of debt without bankruptcy through a debt negotiation service is simplifying the entire debt payment hassle into an affordable single monthly payment. Such monthly payments are accumulated in a trust account for the purpose of ultimately paying off your creditors after your debt has been partially forgiven and erased.

4. Avoid Bankruptcy: For many individuals, avoiding bankruptcy is the primary benefit of taking advantage of a professional debt settlement service. Since a large percentage of your debt is forgiven and since the remaining debt is paid, you end up with less debt, a workable time to pay the remaining debt and all of it is administered without bankruptcy.

Not everyone is eligible for debt settlement services, so you’ll need to speak with a debt settlement professional to get all the details and see if your circumstances can benefit from such services.

If you want to learn more about the details of debt settlement and find out if your circumstances qualify for debt negotiation services, click “Contact Effective Financial Solutions” for a free and no-obligation personal debt consultation.

Here is how it works: A Debt Negotiation company sets up a “trust” for you.

You stop making payments on your credit cards and other unsecured debt and that money is deposited into the trust for later payment (albeit it “less” payments – often less than 50% of what was originally due).

A legitimate company will use an FDIC insured company for the trust account and give you access to it.

Credit card accounts typically go into collection after they are charged off, typically 180 days after the last payment on the account and the debt settlement firm will negotiate the balance due down as low as possible – often lower than what a consumer could hope to negotiate on their own.

It is imperative that a consumer desiring debt settlement services use an experienced company that understands all the ins and outs of the process and who will educate the consumer on all of the pros and cons of debt negotiation.

Here’s what I mean.  If you had a debt that was $1000 and it was settled for $500, that means the bank will take $500 and call it even.

If you are paying the Negotiator a percentage of what he saves you, and that percentage (which is usual for the debt settlement industry) is 25% of what you are saved, then he would make $125 (25% of the $500 the Negotiator saved you).

If you add the $500 to the bank plus the $125 to the Negotiator, that totals $625.

If the Negotiator got a better settlement, let’s say the bank agrees to taking $400 of the $1000 that is owed, then the Negotiator will make 25% of the $600 he saved you, or $150.

Add the $400 that goes to the bank to the $150 to the Negotiator and it totals $550.

THE NEGOTIATOR MAKES MONEY WHEN HE SAVES YOU MONEY

The point here is that the better the Negotiator saves you, the more money he makes, but at the same time, the less money you pay.

That is called a performance based fee and is the type of fee that you want to pay if you are going to go with a Debt Settlement company