Do it yourself debt settlement can be a very effective way to pay off your credit card and unsecured debts if you are a good candidate for it. It’s an aggressive method to resolving your accounts but it’s not for everyone and every situation. Many consumers, professionals and small business owners need help in determining if they qualify. Here are 5 questions to see if do it yourself debt settlement can help you:
1. Are you experiencing a legitimate financial hardship? This is typically unemployment, divorce, medical disability, loss of financial provider, a pay cut, loss of child support payments, or some other serious circumstances that caused the financial crisis you are undergoing. The main idea here is there should be an identifiable circumstance that you can point to that has caused your inability to repay your minimum debt payments when they are due.
2. Do you owe more than $10,000 in unsecured debt? If your debt level is too low, there likely won’t be enough room to bring the balances down. But this is more of a factor that applies to the individual accounts than your total debt amount. Simply put, an account with a $3,000 balance has more negotiating room than an account with a balance of only $600. Discounts can still be negotiated, but will probably be smaller if the account balance is lower. Everyone’s situation is unique so this is more of a guideline.
3. Is the majority of your debt from credit cards? While debt negotiation works effectively for a wide range of unsecured debts, it works best for credit card debt. The largest discounts can be negotiated on credit card accounts because they are the most common form of unsecured debt. Other types of unsecured debt can also be effectively negotiated down, but the result aren’t as predictable.
4. Are you determined to avoid bankruptcy? Do it yourself debt settlement and debt negotiation works best if you are genuinely determined to avoid bankruptcy. It is very common for debtors to threaten to file bankruptcy when speaking to their creditors seeking collection, and that’s a big turn off to the creditor. They would prefer to deal with someone who is taking a proactive approach and is willing to work things out. Also, you must be determined to avoid bankruptcy because the road to negotiating and paying off your debts will have some bumps here and there and if you’re not prepared to overcome them, you’ll be less likely to succeed.
5. How quickly can you save up for settlement? At the end of the day, it comes down to how much you have to offer your creditors and how quickly you can save up for it. A general rule of thumb is that your monthly savings goal should be at least 2% of your balance ($200 for every $10,000 of debt). This amount is likely much lower than your current minimum monthly payments, which is what makes debt negotiation appealing to so many. Even though they are experiencing a financial hardship, most people want to honor their commitments to their creditors, and debt settlement can help them repay what they can afford to and avoid filing bankruptcy.
It is important to note that the most successful debt settlement candidates are able to supplement their monthly savings with other financial resources such as real estate equity, pulling money from a 401k account, pulling money from an IRA account, or even borrowing from friends and family. Any type of cash infusion will help shorten the timeline to save up for settlements and help you to settle the accounts sooner.
If you meet the above conditions, debt settlement is a good fit for you and is worth serious consideration. The advantages to handling your own negotiations are too good to ignore and you’ll save thousands of dollars if you do it yourself.
