How Debt Settlement Companies Can Help Rebuild Your Credit Score

How Debt Settlement Companies Can Help Rebuild Your Credit Score

Whether you are falling back on your finances because of job-related issues or were hit by an emergency expense, being in debt can have a crippling effect on your family, relationships and on your health.

Many people make the mistake of tackling the situation on their own because they’re too embarrassed or aren’t knowledgeable enough to cope with different options. Fortunately, there are helpful options to choose from and this includes hiring a debt settlement company.

What Is A Debt Settlement Company?

A debt settlement company deals with creditors on your behalf. By seeking their help, you can avoid the worry of a distressing bankruptcy. The company will work with your creditors to ensure you are financially afloat and can handle your debt in a responsible manner.

Also, unlike bankruptcy, debt settlement remains on your credit record for 7 years without any public record.

Debt Settlement Company Settling Debt

With the aid of a debt settlement company, you stop making payments on your outstanding debts and start paying the company instead, which deposits the money into the designated account. Once the debt settlement company believes you are doing well enough, they negotiate the debt on your behalf.

Another great advantage is the company cannot charge you upfront fees, by law. You are either required to pay the agency a percentage of the debt eliminated by the settlement or on a percentage of your total debt.

Please understand that debt settlement is different from debt negotiation and debt consolidation.

In debt negotiation, the company negotiates with your creditors to lower your monthly bills and interest rates but your loan principals remain the same while in debt consolidation, you are allowed to pay a lower interest rate to the company but the loan principal remains the same.

Reasons To Opt For A Debt Settlement Company

Here are a couple of reasons why you should opt for the services of a debt settlement company.

Say Goodbye To Debt

We get it, managing money isn’t easy and most people have to tackle typical expenses, including car payments, groceries, mortgage, utilities and credit card payments, in addition to the money spent on entertainment and miscellaneous items.

Add in medical bills and student loans and soon enough, there are so many due dates to keep track of. Missing the date by just a couple of days can lead to a heavy penalty, not to mention by then your interest rates are sky-high.

Medical Bill and Student Loan

One of the biggest advantages of seeking the aid of a debt settlement company is it allows you to eliminate debt in a stress-free manner. This is because the company negotiates with the creditors on your behalf, who then settle for a smaller amount. This will make it easier for you to pay off your dues.

Negotiating Better Interest Rates

Unsecured debt from personal loans and credit cards carry interest rates, some of which are incredibly high. This is because these payments only come into effect if you don’t make full monthly payments. This causes creditors to add a percentage to your overall balance each month.

Unfortunately, if you are only paying the minimum amount each month, the high-compounded interest might force you to pay twice as much compared to what you originally owed.

Fortunately, debt settlement companies hire financial experts and have strong professional ties within the industry including collection agencies and creditors. These experienced professionals understand the intricacies of interest rates far better than the average people.

This is why they are able to negotiate with creditors and come up with a lower interest rate. This significantly cuts down the final amount, allowing you to make relatively smaller payments.

Rebuild Your Credit Score

Unfortunately, the average customer is not knowledgeable when it comes to personal credit score and the importance of maintaining it. Having a good credit score will help your get better interests on credit cards on personal lines of credit, get larger loans and raise your credit limits.

Credit Score Examples

Maintaining a good credit score is not too difficult but having too much debt and missing payments can cause your score to take a plunge.

Eliminating your debt with the aid of a settlement company improves your score and looks good on your credit report. Since you will now only have to pay to the debt settlement company, you can show creditors that you are on top of your game and can pay off all your debt.

Peace Of Mind

Staying on top of your bills can be stressful. Not to mention, nobody likes receiving threatening calls from creditors demanding payment. All this stress can take a toll on your health and make you feel the burden of financial hardship.

Fortunately, seeking the help of a debt settlement company can put an end to those harassing calls from the creditors, resulting in peace of mind. Saying goodbye to those constant calls can help return some order in your life, allowing to feel in control. Paying off your dues with a debt settlement company can help you improve your quality life.

Avoid A Costly Bankruptcy

People who are unable to manage their finances and struggle to pay off their debts are in constant fear of going bankrupt. Sure, bankruptcy can rid you of debt, but it can have a crippling effect on your credit score.

Costly Bankruptcy

Bankruptcy can cost you a huge chunk of your credit score. Not to mention, the bank can seize your assets, such as your car and house, as part of a bankruptcy settlement. Fortunately, with the help of a debt settlement company, you can restore your credit quickly and pay off your debts.

What To Look For In The Best Debt Settlement Company

When it comes to your hard-earned money, you can’t put your trust in just anybody. Contrary to what people believe, the best debt settlement company is not the one that advertises the best. There are plenty of considerations you need to keep in mind while paying off your dues.

Some general factors include customer support, fees, and transparency, among others. Here are some important factors you need to keep into account before you sign up with a debt settlement company:

  • Low Fees: You already have money problems, why pile up the bills. With proper research, you will find companies that offer the best services at a reasonable price.
  • Accreditation: You need to ensure the company you are putting all your trust in is accredited by reputable organizations, including the Better Business Bureau (BBB), Professional Debt Arbitrators (IAPDA) and the American Fair Credit Council (AFCC). Accreditations are important because it ensures you are dealing with a credible organization.
  • Navigable: If you have only recently heard about debt settlement companies, you probably have plenty of questions. Make sure the company has a comprehensive website with clear descriptions and no hidden charges. It will also have a page answering common FAQs.
  • A Reasonable Timeline: Most companies offer a timeline of two to four years. However, the best and most efficient companies will help you pay off your debt much quicker.
  • Longevity: Opt for companies that have been in the business for several years and have a good reputation. Beware of crooks that opt for shady methods to lure in customers.
  • Extensive Customer Support: Good customer service can make all the difference in the world. You should easily be able to get in touch with the company’s representatives via telephone should you have any problems or queries. Free consultation and online chats are also a bonus that shows the company is dedicated towards helping its customers.
  • Low Minimum Debt: The best debt settlement companies do not undermine customers with lower debts. The best companies are willing to solve your problems, even if you don’t owe as much money as some other people do.
  • Variety of Debts: Most companies work to settle credit card debt, involving medical bills. However, the best companies are willing to settle various kinds of debts including student loan, business loan and in some cases, specific secured debt.

Before you hop onboard and sign the dotted line, it is important you read the instructions carefully and seek the advice of a friend and family member about debt settlement. The document should cover everything, including programs and risks, to ensure you are not being scammed.

Why You Should Pay Off Debt As Soon As Possible

Most people are likely to allow debt to pile up. After all, individual payments seem pretty affordable in the beginning but the money eventually starts to pile up. Many people do not feel the real stress until the cost drastically builds up.

But what do you do when things get out of hand? It is best that you seek the help of an expert before things get out of hand. Here’s why you should pay off debt as soon as possible with the guidance of a debt settlement company:

Reduce Stress In Your Life

Avoid Stress due to debt

The thought of increasing debt can cause you to live in constant fear and stress about how you are going to cope up with debt payments and other living expenses.

Sure, a little stress is common but constant stress can lead to serious health issues, including high blood pressure, migraines and even heart attack. In short, being debt free can save your life.

Be A Good Example For Your Kids

You might have made your share of mistakes but it is not too late to turn things around. Set a good example for your kids by paying off your debt as soon as possible. Talk to them about the importance of being smart with money. Once you are debt-free, your financial lessons will not seem hypocritical.

Cut Down On The Number Of Bills You Pay

It’s obvious, the more money you owe, the more bills you will have to keep track of. The sooner you become free, the fewer bills you will have to pay every month.

Once you are debt free, you will only have to pay for a few essential monthly expenses. This includes insurance, utilities, and groceries and that’s that. Not to mention all these expenses have minimum interest charges and payments.

Own Your Assets

The house you have on mortgage isn’t actually yours. It belongs to the bank and that also includes the car. The sooner you understand this harsh truth, the better. Being debt free means you own the car you drive and the house you live in. This ensures you do not have to worry about somebody taking your belongings because you could not afford to pay for them.

Owning your own car

Stop Being At The Mercy Of Your Lenders

Keep in mind that when you have outstanding debt, you do not get to make decisions regarding money. Eventually, it is the lenders who decide how much and when you pay them.

Not to mention, the lenders can increase your minimum payment and interest rate, leaving you with little time to fix your budget. Being debt-free ensures you are no longer at the mercy of your lenders and you have complete control over your finances.

Increases Future Earnings

When you charge something on your credit card or take a loan from the bank, you are basically borrowing money from your future income (which you haven’t even started earning). Once you are debt free, you will finally be able to increase your future income instead of paying off what you owe. Being in debt can lower the quality of your life, giving you less money to spend.

Personal Finances going up

Being in debt can cause considerable damage to your credit score. Working with a debt settlement company can improve your quality of life and enable you to get rid of debts quicker.

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