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Debt Settlement Overview

Debt Settlement Reduces Your Balance – Not Just Your Interest Rate

Debt settlement is really nothing more than good old-fashioned haggling. Through the process of negotiation, debt owners or their debt settlement company arrange to pay back a portion of the debt. The creditor forgives the balance in a transaction called a “settlement.”
Unlike debt consolidation or credit counseling where you pay back the full balance on your debts, debt negotiation requires that you pay back only a portion of the balance. This can make a huge difference in how quickly you pay off your balance.
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Instead of 5-9 years as with Credit Counseling, with a good Debt Settlement Program, you can settle your debt in 3 years or less depending on the pace at which you fund the program. Also, you can save thousands of dollars through Debt Settlement versus other debt reduction options.

Major Advantages of Debt Settlement

  • BETTER THAN BANKRUPTCY. Provides an ethical and honorable alternative for those who face bankruptcy.
  • PRIVACY. Debt settlement allows you to maintain privacy over your financial affairs (unlike bankruptcy, where everything becomes a matter of public record).
  • CONTROL. Lets you take charge of the program and control your own destiny (unlike bankruptcy, where the courts decide everything).
  • SPEED. Gets you debt free faster. Typical debt settlement programs have a duration of only 2-3 years versus 5-9 years or more for Debt Consolidation or Credit Counseling.
  • LOWER OVERALL COST. Debt settlement ultimately requires the lowest total payout versus debt consolidation or credit counseling.
  • FLEXIBILITY. Provides the most flexibility of any program in terms of monthly budgeting. If you have to miss a month your only penalty is that the program may take longer to complete. You can also “make it up” down the road by funding over and above your basic level.

Contact us to find out if you qualify for debt settlement.

The Debt Settlement Process

The goal with debt settlement is always to significantly reduce the amount that must be paid back. Negotiation experience helps, and so does having enough capital to make a lump-sum offer.

The first thing a debt settlement company will do is consult with the lender who initially provided the loan. If the account is more than six months overdue, the debt may have been turned over to a debt collection firm whose only real goal is to siphon as much cash as they can from the debtor.

If an initial agreement is reached with the lender, you are generally asked to quit paying creditors and instead send monthly payments to your debt settlement company to build an account for repayment. At the same time, it is important to keep an eye on your interest costs as they may be expanding simultaneously.

When enough capital has been secured to settle the debt, then it’s time to make a deal. This part of the process requires patience. If the financial institution accepts, get it in writing. Additionally, ask the creditor to send the settlement agreement to the significant credit bureaus so that they understand the debt has been resolved.

What Happens If Lenders Will Not Settle?

Creditors have no legal responsibility to work out a settlement on a credit card debt or other unsecured loan, but they are often able to recover more funds through debt negotiations than the alternatives such as a lawsuit or working with a collections agency.

Contact a debt relief specialist at New Era Debt Solutions today.

Types of Debts Qualified for Settlement

Credit card and medical costs are the most suitable for the debt negotiation process since the card company or medical provider can get nothing with bankruptcy or other debt relief alternatives. The Board of the Federal Reserve states that over 7% of charge card debt was 90 days past due in Q4 of 2016. The Fed classifies these types of financial obligations as “seriously overdue,” which makes them qualified for debt settlement. Over 25% of adults in the United States had trouble paying off their medical bills in 2016, which likewise are also qualified for debt settlement.

Student debt & car loans are a different story. It can be much more difficult to secure a debt settlement for these types of loans. If a debtor has defaulted, the government allows a debt collector to accept a lump-sum repayment under three conditions: A) You pay the equilibrium of the lending as well as the rate of interest, however not the collection agency fee; B) You pay the principal plus half the overdue amount; or C) You pay 90% of the remaining principal as well as rate of interest.

Debt Settlement Alternatives

Feel that settlement may not be right for you? Debt settlement is not the only form of debt relief that many debt settlement companies offer. Debt management plans, debt consolidation, and credit counseling are all possible alternatives to help relieve your debt.

Debt Consolidation

In debt loan consolidation, a debtor takes on a single loan to repay smaller debts, often attaining a reduced rate of interest at the same time. If the sum is unable to be repaid after it has been consolidated into a single secured debt, then there may be few other options than bankruptcy.

Credit Counseling & Debt Management Plans

With credit counseling, a debt settlement company can establish low-interest financial obligation management plan so that a debtor can pay off their unsecured debt gradually. A debt management program (DMP) reduces your month-to-month payments so you can ultimately settle your debt completely without being buried by the burden of repayment in the short term. The downside to this form of debt relief is that it does little to reduce the overall sum of debt owed, unlike debt settlement.

Balance Transfers

If you have a significant amount of credit card debt, a balance transfer card may the right form of debt relief for you. A balance transfer is when you move financial debt from one credit card to another, generally to benefit from an introductory 0% interest rate deal on the new card. The downside is that they typically charge an additional fee to transfer the balance from one card to the other, which can lead to a significant, added cost.

To determine if an equilibrium transfer could work for your financial situation, check whether you’ll pay more loan on the interest settlements on your existing card than the cost of the balance transfer charges. With this form of debt relief, it is also important to pay the balance off prior to the card’s advertising period ends to stay clear of paying any additional interest on the debt.

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Debt Relief Options at New Era Debt Solutions

Debt settlement is not for everyone. However, for those in the right circumstances, debt settlement can be a powerful path to financial freedom. Contact us to find out if you qualify for debt settlement.

Over $250,000,000 Debt Settled Since 1999!
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