Who Qualifies for Debt Settlement?
Debt settlement , which is also commonly called debt negotiation, is a popular debt relief tactic used by consumers to reduce credit card debt. Unfortunately, this tactic will not work for everyone. While consumers do not have to meet specific credit requirements, they will need to meet other criteria.
Three Things Debt Relief Companies Look for in Clients:
1. An inability to repay debt: Creditors will not always be willing to negotiate, especially if they believe that a consumer obtained credit with no intention of paying their bill. The ideal candidate is someone who had good intentions, but fell into a bad situation. A consumer that stopped paying their bills because they lost their job, took a pay cut, or began suffering from a medical condition will be at a greater advantage than someone who stopped paying their bills for no good reason.
2. Large unsecured debts: The ideal candidate should also have over $10,000 in unsecured debt. For debt negotiation to make sense, consumers will want to negotiate accounts with balances of at least $1,000. While it is possible to negotiate smaller accounts, the savings will not be as great. If possible, it may be more beneficial for consumers to pay off small accounts on their own. This will also help a consumer’s credit score, which may offset some of the damage done by the negotiation process.
3. A history of late payments: Creditors will not usually negotiate with consumers that are current on their payments. For a creditor to be willing to negotiate, the consumer must be struggling to make their payments each month. Of course, this doesn’t mean that a person should just stop paying their bills. Negotiation is the best option for consumers who are truly struggling to make their payments and need relief from their debt.
Debt settlement is not the best option for everyone. However, if a consumer has a lot of unsecured debt and has fallen on hard times, settlement can be a beneficial option. To determine if this debt relief option could help your situation, you may want to contact a financial professional experienced in debt negotiation.