What Is A Debt Settlement Plan?

What Is A Debt Settlement Plan?

A debt settlement plan is another solution if you’re looking for an alternative to help you manage your debts and pay them back with less stress. It is chosen by people who do not want to declare bankruptcy and want to pay back a portion of debt.  The DSP may also be for those who cannot afford the payment as stated in a debt management plan and have stopped paying unsecured loans.  For more about a DSP, check out the following:

What’s a debt settlement plan?

Using this strategy, you’re making a monthly payment to a   deposit account.  The amount is predetermined as to how much you can afford paying. Under it, you’re not making the monthly payment straight to your creditors.

You’re also going to use a credit counselor service, which will be the one to negotiate with the creditors.  You do not make monthly payments to the credit card companies and the service provider negotiates with creditors for a lower repayment.

So how it works? The company will negotiate and reach a settlement with the creditors; the settlement payment will be paid using a separate deposit account.

debt settlement plan

However, you must weigh the upsides and downsides of using the debt settlement before signing any agreement with the settlement company.

Check out the following for the main benefits as well as a few factors to help you decide on knowledge and find out if it is the right service to use.

DSP Benefits

  • It may help in reducing your total debt.
  • A debt settlement plan may be a suitable alternative for bankruptcy.
  • A longer repayment period of up to five years may be negotiated and settled.
  • It lets you track your finances, plan ahead, and save the amount for the settlement.
  • It offers you flexible payment arrangements, although changes can be made if you need it. You just contact the DSP service and tell them about it.

Potential Risks

  • A DSP may affect your credit profile or score.
  • The creditors have the right not to accept such settlement proposals.
  • The collection activity, including calls, will drastically escalate.
  • You may be taxed on the debt’s portion that you failed to pay back.
  • The debt balance can increase due to interests and late fees, while the settlement negotiation is ongoing.
  • Usually, it takes at least six months before the first settlement happens..

Upon knowing all these things, you must also remember that agreeing to pay creditors less than the amount you owed must be avoided because it could hit your credit standing.   Additionally, the taxes and fees you’re paying under the settlement program may offset what you’ve saved through paring down the debt.

That’s why you need to seek counseling for advice if it will solve your problem or not, or if a debt management may be a better option for you, especially if you have a low income to keep up with debt or when you can notice that you’re borrowing from another creditor in order to pay for another.

But then if debt settlement is the right option for you, then you should know if the creditors are willing to negotiate because they’re not required to agree to a settlement proposal. For the best results, you must study your options well and figure out if DSP is the most suitable route to take in paying off debts. Consult an expert for sound advice today!

What Is a Debt Management Plan?

Consolidating your debt into a single payment is one of the best ways to get rid of stress, not debt. It is a strategy used by many people who want to combine their debt into one in order that they pay only a single monthly payment, usually lower interest rate and longer repayment period.  Now, what’s a debt management plan?   Take time and learn if this is the solution for you, so keep reading for more about it.

How a Debt Management Plan Works

A credit counselor sits down and reviews your personal finance and budget. He or she will spend up to 90 minutes in reviewing these things.  Then, he will provide you with an advice or recommendation on how you can control your spending and reduce debt. After, he or she will provide you a new budget plan, which suits your situation.

What to Remember

  • Under a debt management plan, unsecured debts may be included, but then secured loans, including home equity loans, mortgages, auto loans and student loans are not.
  • The collection debt may be included in the debt management plan only if the collector is yet to receive a wage garnishment following a court judgment.
  • Your credit cards should also be closed, so no new credits should be obtained under the plan.

At the end of the day, you must remember that the plan is only one component of the debt solution. The DMP is also a voluntary agreement that’s among three parties – the creditor, the client and the financial counselor.  If it becomes successful, each party will meet his or her expected goals.

debt consolidation management

How DMP Works

  1. You (the client) will attend a session, which will discuss the repayment plan and your budget. You will also be offered certain educational materials as well as finance advice from the counselor.
  2. The client’s financial and debt data will be entered into the DMP system. If you’re a qualified candidate, a plan will be proposed. The proposal will be submitted to the creditor according to the debt management plan that’s created using your information.
  3. You will then have to sign up for automated payments; each payment will be transferred from your bank account to that of the creditor’s using an electronic transfer to ensure you’re payments are on schedule.
  4. The DMP service will send you a monthly progress report that you can review and compare to the creditor’s statement.
  5. The DMP payment will stay the same, and the extra funds will be split and used to pay off the remaining accounts once one debt is paid off. **You can report any discrepancies or issues or if your current financial situation changed to the debt management company.

Is a Debt Management Plan for You?

There is no definite answer to this question. It pays off to consult an expert advice to understand if it fits your current situation and if it is what best works to help you pay multiple debts. For assistance you need, do not think twice consulting us today!

Five Debt Consolidation Mistakes & Traps to Avoid

If you have multiple loans and you need to pay different credit card accounts, for example, you may be one of those considering debt consolidation (can be a loan, a settlement or a management program). But if you’re less careful and you’d be committing the following debt consolidation mistakes in debt consolidation, your problem could be magnified and grow in uncontrollable proportions. So in today’s guide, we’d like to cover the most common mistakes in debt consolidation that many people fall into, making them more frustrated

Failing to research and make a wise decision

Not seeking the right help will make you end up paying more. That’s why you need to spend some time in research, consult a finance expert and compare different options available to manage debt.   

Before settling for a loan or a service, you may want to explore what’s available to avoid paying more fees – including higher interest rates and principal.

Falling into online fraud

Avoid falling into the trap of fraud artists who are ready to take your money away. 

Today, there are many debt consolidation companies, which services are selling like hot cakes, but you’d put yourself into much trouble if you will not figure out that you’re dealing with a legit. 

For one, their rates look affordable, but in reality, clients end up paying much more because there are hidden charges that are NOT revealed.

Not knowing and failing to address the real problem

Let’s admit it.  Many people drown in debt due to the wrong financial decisions they made. This is one of the real problems that you need to address first.

That said you may want to look into your spending habits and take note of those areas where you have overspent on things you don’t need.  

Along these lines, you may also want to reflect on your lifestyle to determine how much you are spending and on what areas. Bottom line, you must be able to “live within your means, create a budget, and don’t spend more than what you can afford.”

Not consolidating the right debts

Don’t fall into the trap of consolidating the wrong debts (low interest rate loans).  You must know that a debt consolidation loan is much more helpful for paying off high interest loans. For example, you may not want to include student loans into the consolidation because these can be transferred to a 0% credit card. So apart from choosing a debt consolidation company, you need to decide on what debts you want to consolidate.

Not complying with the terms of the program

A debt consolidation loan isn’t a way to get rid of debt but a means of managing it better. If you don’t stick to the plan, you’d hurt your credit score badly, and that will be remembered by the banks and lending institutions.  So before signing up with a service,    you must also consider your resources and see to it you’re following through with the debt consolidation plan.

debt consolidation plan

If you don’t want to suffer from frustrations later, it will pay you off to review everything and ask for clarifications if you don’t understand any of the terms stipulated in the program.  You must also weigh the pros and cons of a debt consolidation plan and find out if you could live with its downsides.

Summing Up

Before considering debt consolidation, know the real problem and address it, determine a suitable debt consolidation program, compare different options available and seek advice from an expert. Finally, choose a reputable debt consolidation company with proven record of accomplishment and reliability in the field to ensure you’re not dealing with a fraud.

Do You Qualify For Debt Consolidation Loan?

If you need it to pay off your debt, you must know that providers of debt consolidation loans have their qualification requirements as to whether you’ll be approved or not just like bank and other financial institutions. The following is a quick guide on what the companies are using in reviewing your loan application.

Will You Qualify for the Debt Consolidation Loan?

There are many companies that make use of a scoring system for ranking your credit, while others use analysts to determine if you qualify for the debt consolidation loan or not. But whether or not they’re using these systems, the following are the basic requirements:

Income

The loan company wants to ensure if you’re capable of paying the loan back. Many of them will ask for proof of income in order to determine if you have a steady and stable job to pay them back. They also want to make sure that you’re making enough money to cover the monthly payments. Additionally, they may require “debt to income ratio” and 10-15% disposable income monthly.

Credit Worthiness

Many of them may even look for a high credit score when reviewing an application.  However, it does not mean you should have a perfect credit score or standing before applying for a debt consolidation loan. Still, many of them will determine if you qualify within their required credit threshold, which ranges between scores that determine your credit worthiness. They use it to evaluate potential risk of a borrower. The lower is the risk for them if they’d approve borrowers with a high credit standing.

debt consolidation loan

Stability

More likely than not, the loan company wants to determine if you’re always relocating or you’re staying in one place of residency for at least two years.  They will also ask the length of time you’ve been working in your current company.

Home equity

Collateral is another important requirement of loan companies that are reluctant to give large amounts of money to someone without it.  So without even saying, the loan company would want enough home equity in order that you qualify for a debt consolidation loan. Now if you don’t have enough collateral, such as home equity, it would be impossible to get a huge sum of debt consolidation loan.

That said owning a home is almost always a sure way of qualifying for just any types of loan. It plays a significant role regarding your chances of being approved for the application.

As with home collateral, the loan company will just foreclose the property and then sell it to use the proceeds to settle your loan.

Payment history

This is one of the basics that the loan company looks for when reviewing an application, looking into your history in terms of paying back your creditors.  Do you settle monthly payments on time?  Do you have a good payment history in paying off debts and bills?

Choosing a Debt Consolidation Loan

So no matter your situation, you must do your homework to compare different lending companies before submitting an application. Also, take note that a loan company may have additional requirements. Nevertheless, research and compare the available debt consolidation loans and figure out which among them is suitable based on your current situation (and on interest rate, period of repayment, etc).

How to Choose a Debt Consolidation Service

There are many debt consolidation services online, promising the same thing – get rid of debt fast so that you can finally move on with your life, but these services are not created equal. So if you’re in the middle of deciding which one to select for help with an unmanageable debt, check out the following for a guide on how to evaluate several companies.

debt consolidation loan

Know what debt consolidation is

Don’t be someone who doesn’t understand what the term means, as it might put you into the further financial trouble. Know that consolidating debts is combining multiple debts into a single loan, letting you pay for one monthly payment and with one interest rate. It helps you manage payments with favorable terms, usually with a lower interest rate.

Understand what you will be getting

Take note that not all debt consolidation companies work in the same manner, with the same terms, etc; some may offer only settlement, others loan and the rest management. So if the service you’re looking is to ease payments and get better loan terms, you may want to get assistance from a company offering a debt consolidation loan, which amount may be able to cover the debts you’re looking to consolidate.

When approved, the loan with be used in paying off old debts, including credit card loans, car loans or mortgage.

Ask about repayment period and interest rate

Is the new loan’s repayment time longer than the old debts you’re currently paying? Will it just make you end up paying more debts? If the loan can help you manage payments, then it may be a good choice.

Know why you want a debt consolidation loan, which repayment period can be longer meaning you need to pay for a longer time.   But if you want to pay less in a monthly bill, then the only option for you may be a longer repayment period.

When getting a debt consolidation loan, see to it that the interest rate from it is actually lower than what you’re paying now; if not, then it might cost you more debts.  So at the end of the day, it matters to scout for and find the lowest interest rate for a debt consolidation loan. You can use online calculators to figure out how the low interest rate can affect the repayment plan as well.

Check for reviews

Read reviews about the loan company online to know the people behind it are. Look for both positive and negative reviews but shortlist those with mainly positive feedback.

Again, some companies are not loan companies, but simply counseling service or debt management/settlement companies. Such offers are for individuals who have a poor credit standing, which also means they’re not qualified for the loan.

Briefly, credit-counseling services are money management counselors, who can assess your current financial situation. They can also work with you in developing a financial plan that may be able to help you get you back on track with your finances.

Meanwhile, a debt management plan is a service that makes one payment to the credit counselor monthly or within a pay period.  Then, he will make the monthly payments to the creditors. In that case, this type of service will not be able to lower your debt.

The reason is that the credit counselors are not negotiating reduction in the owed amount, but they can help lower the monthly payment. They do it by negotiating period extensions over which you’d repay the loan and getting creditors reduce the interest rate.

On the other hand is a debt settlement plan. It is often used as a last resort, which you might not be ideal for consideration unless you’re on the verge of default or you’re on default.   What the company does is negotiating with the lender about withholding payments.   By considering this option, you will pay them, and then they will put the payment in escrow and allow your loans to be put into default.

Bottom Line

Know the people you are working with before settling for a debt consolidation company that can help in getting your finances back on track. Choose a debt consolidation service with the reputation in the field as well as can give you sound advice on which option to take – debt consolidation loan, debt management plan or debt settlement plan.

Top 5 Benefits of Debt Consolidation

What are the benefits of debt consolidation? Debt consolidation offers a solution if you’re struggling to repay multiple debts, including car loans and home loans.   But if you are qualified for this type of loan, you may be looking for information on the possible benefits with which it can provide you.

Debt Consolidation Benefits

  1. It lets you make a single payment

One of the major advantages of getting this type of loan is taking out a single loan in order to pay off multiple debt accounts, especially if you have different credit card accounts, each with balances on them.

With a debt consolidation loan, you can combine all your credits into a single source and avoid the burden of making multiple monthly payments, each with a different deadline. 

This type of program lets you focus on the debt, making a single payment and letting you pay the loan off faster. So without the burden of paying multiple accounts and sometimes losing track of your payments, you can pay only one monthly payment, which in most cases are smaller because you can pay the loan off within a longer period of time.

debt consolidation help

  1. You don’t need to take many collection calls

Collection calls are performed by credit card companies, banks and other financial institutions to collect payments from you.  If you have multiple debts, you can just imagine how many times you need to take calls from these companies almost every single day.

  1. You can improve your credit score

A debt consolidation loan can improve your credit standing or score, especially if you’re always making late payments. With one, you can rebuild your credit score easier and faster than without it.

  1. You will pay a lower interest rate

Another significant advantage of using a debt consolidation loan is reduced interest rate.  

If you’re having trouble with multiple loans and debts with high interest rates, then using a debt consolidation service may be the solution because you get cheaper interest rate that will save you money on monthly payments.

However, companies implement different interest rates and have debt consolidation plans as well. Take time in comparing your options, or better yet consult an expert for sound advice on what to expect using the service.

debt consolidation guide

  1. You can have an easier life

Just imagine consolidating multiple debts into a single account and paying only one monthly payment.

This is one of the stress-free ways of managing your finances, getting rid of worries about paying your debt or forgetting a credit account’s monthly payment. 

Using a debt consolidation plan that suits your financial situation, you can have an easier life, giving you more control of it, other than the debts taking over.

BOTTOM LINE

Debt consolidation offers plenty of benefits given you’re using the right company for it. Choose one based on its reputation, background and experts. Do your homework, study your options and weigh the pros and cons so that you can truly take advantage these benefits from a debt consolidation loan. For more help, don’t think twice contacting us today!

Basic Debt Consolidation Guide You Should Know

With the rough and tough economic times, people are struggling in paying off debts, so many are using loans, which are available at different interest rates for individuals with varying credit scores and incomes.

But while getting a loan or credit can be easier, paying it back isn’t. And when you cannot pay credit cards, mortgages and loans, you’d suffer from a financial crisis and feel desperate. Today, there are debt consolidation programs or loans, which are chosen by individuals as a solution in paying debt.

debt management

What’s debt consolidation?

It’s a type of loan to choose if you think you’re in a financial crisis due to multiple loans to repay, such as a car loan, personal loan or mortgage, to name some.  You may select it if you’re struggling to pay your debts separately (principle and interest rate) monthly.   

It helps turn a few loans into a single loan – paying only one interest rate. It can help you get out of the financial struggle easier and let you save money in paying the interest.  In short, the debt consolidation may be your solution if you want to get out of the debt burden faster and pay loans easier.

Are there debt consolidation benefits?

First, take note that it isn’t a shortcut to get you out of your financial trouble; rather, it is one of the tools to help you get rid of debt faster.   

However, the debt consolidation can only help you solve your problem if you’re going to choose a reputable debt consolidation service or company. With one, you can take advantage of…

  • Reduced interest rates
  • Credit score protection
  • Reduced monthly payments
  • Faster debt elimination

So without even saying, the main advantage offered by a debt consolidation service is it lets you repay your loans easier and with less stress.

It can organize your finances because it can combine your payments into only one payment. However, you must do your homework, weigh your options, review the pros and cons, and ensure the plan suits your current financial situation.

Debt Consolidation Steps

  1. Do not procrastinate and act now. The first step in getting rid of debt is not ignoring it and taking action immediately. If not, you will suffer from more stress and repay loans longer.
  2. Know the risks. Deciding to consolidate your loans must be taken seriously. It is not a matter of a one-minute decision to make. Thus, you may want to seek advice from financial counselors that have intimate knowledge on loans and that are proven experts in the field to explain the risks of turning any unsecured debt into a secured one or using home equity in paying off a credit card debt.
  3. Study your options. Check out and review the types of debt consolidation plans available, including debt management plans or alternatives including getting a home equity loan or borrowing from retirement funds. In the case of student loans, you cannot consolidate federal loans with other types of debts, although you can consolidate them with other debt sources.

Getting Started with Debt Consolidation

There you have a quick guide on what to expect and how to consolidate loans to make debt repayment easier. If you need a sound advice, get in touch with an expert at Dscconsolidation.com today!

Four Debt Consolidation Loans: Which Is for You?

Are you deciding on debt consolidation loans that will ease up the burden of making monthly and multiple debt payments?  If so, then this guide on the types of debt consolidation loans is for you. Before anything else, let’s have a quick preview on what a debt consolidation loan is and how it works.

what is debt consolidation

What are debt consolidation loans?

These loans work by letting you combine debts with the highest interest and pay them using one loan with a lower interest rateBy combining debts, you’ll be able to lower monthly payments and afford debt bills. But if you’re new to this, you must know the types of debt consolidation to help you select on which option is right for you.

Personal loan

It is one of the loans to use if you’re qualified to borrow a significant loan amount; this is an unsecured loan type, which payments are fixed over a given period of time. However, not all people can qualify for this type of loan, and in approval for people with a bad credit score, they need to settle for a higher interest loan.

Credit card balance transfers

Another type of debt consolidation to use, credit card balance transfers move a credit card’s balance into a single credit card. This type usually comes with a lower interest rate in the event of promos. The promotional rates, however, expire within a time period. Thus, you need to know when it is expiring and when the regular rate is taking effect.

Before using credit card balance as a loan for debt consolidation, you also need a large credit limit in order to cover or hold the entire credit card debt. However, your credit score will be put on the line and it will be hit using this type of loan because putting a huge sum of debt into the credit card impacts your score and your credit usage is going up.

Home equity loan

This type of loan uses home equity as the collateral in the loan, but it requires that you have a fair amount of home equity and you have a good credit score. While its interest rate may be lower than any other types of loans, it puts your home on the line for the credit card debt, meaning you’ll face home foreclosure if you don’t pay up or if its payment goes out of control and you cannot pay.

Debt consolidation loans

The loans can be offered by credit unions or banks, and they’re main objective is combine your debts into one. Take note that these types of loans are different. You may want to consider debt consolidation counseling for guidance on which type of DC loan may be for you based on your situation. But generally, these loans come with a lower interest rate than what you’re paying now. A lower interest rate, however, is at times achieved with an increased period of repayment.

Conclusion

Debt consolidation loans getting rid of debt, but it just shuffles it around in order to make monthly payments easier, allow you to keep track of these payments and reduce events of forgetting payment for an account. With a plan, you’d feel as if you have less debt and less stress in the process. Consult a debt consolidation pro for guidance today!

Living Debt Free

There is an increasingly widely held impression in society today that in order to get by, you have to get into debt at some time or another. This is actually untrue, but because for many people the alternative seems to be a fairly boring life, they feel that it may as well be the case. However, it is possible to live life debt free if you follow some rules and bear in mind that, eventually, you will find a way to make the best of it and actually enjoy your life. Knowing that you can live a life without debt collectors writing, calling and even knocking on your door really makes a difference.

It will require you to make and stick to a budget. This may sound dull, but when you think about the alternatives – debt collectors generally do not tend to be particularly courteous people – it is something worth doing. When you have money paid to you at the end of the month, write down what you will need to spend. Food, rent or mortgage payments, transport and general housekeeping, as well as bills for electricity, telephone and other necessities – these are essential outgoings. What you have left over is disposable income.

By doing this monthly you will before long arrive at a point where you know automatically how much money you have. Treating yourself or others need not be a thing of the past. Indeed, without monthly credit repayments to meet, you will have more scope to do this. It is a more serene way to live.

How To Build Good Credit

Credit comes with pitfalls. We are told this regularly and for many people it seems to be all they ever hear about the process of paying with credit. However, if managed to your advantage, you can make credit cards work for you. Bear in mind that banks and lenders are quick to add charges to accounts when they feel that there is an opportunity to do so – and don’t give them the chance to do it. Do you believe that it costs them that much to administer to your late payment? Of course not – so make sure you are in the driving seat.

To do this, it is a matter of using credit in ways that the bank won’t recommend. The “monthly” payment on your credit card will usually be set at a small percentage of the balance, and the bank will be happy for you to only ever pay that, because you will pay off more than you ever borrow. Interest, plus any charges, will amount to as much money as you borrowed in the first place. However, you can pay more than the monthly payment, so here is how to make it work for you.

When you take out a credit card, use it as you would use an ATM or debit card. Pay for groceries with it when you get your wages at the end of the month, and then instantly pay the balance off in full. For a while, live off credit and use the money that goes into these costs to make payments to your card. Your credit rating will soar. Your bank will offer you better terms. You’ll be in the driving seat.