Credit card debt is something many Americans struggle to pay off. While it is so easy to charge our expenses to a credit card and promise to pay them back later, improper budgeting can mean we don’t have the cash we need to completely pay off our card at the end of the month.
Maine residents are no stranger to credit card debt. With an average debt of over $5,000, many Maine residents are looking for ways to get out of debt quickly.
For some, debt settlement can provide the relief and freedom they’re looking for. But before you sign up for a debt settlement program, you need to consider what it means, what you will need to do, and how it may hurt your future chance of borrowing money.
What is the Debt Settlement Process?
The debt settlement process allows you and your creditor to come to a new agreement about the total amount of money that you owe. A successful debt settlement will allow you to pay much less than the total amount you owe the creditor, allowing you to get out from under the crushing weight of your debt more easily.
Debt settlement can be a great process for some people, but it isn’t right for everyone. Because a creditor wants to get as much money from you as possible, they won’t be quick to settle. In order to settle your debt, you must be very behind on your monthly payments.
In order to qualify for debt settlement, your creditor must be close to believing they won’t get money from you at all. If you’ve already been sent to collections for your debt and you’re not paying, then you may want to consider settling your debt.
What are the Benefits of Debt Settlement in Maine?
The biggest benefit to debt settlement is that you can close your debt without needing to pay the total amount or file for bankruptcy. This will allow you to allocate your extra money towards savings or paying off other debts, helping you get in a good financial standing faster.
If you’re truly struggling to pay what you owe, debt settlement may be able to give you the relief that you need. However, debt settlement does have its consequences.
What are the Drawbacks of Debt Settlement in Maine?
Debt settlement can be a wonderful system if used appropriately, but it does have its drawbacks. If you’re looking for a way to rack up thousands of dollars on a credit card only to ask for your creditor to take a settlement, you aren’t going to get off scot-free.
Debt settlement is recommended to individuals already far behind on repaying their debt because the creditor must believe they won’t get money otherwise. The first recommendation a debt settlement company will give you is to stop paying your monthly payments and to avoid having any kind of communication with the creditor or a debt collection agency.
Each time you miss a payment, your credit score will decrease. In addition to that, you will acquire late fees and interest that will only put you deeper in debt. Once you finally get a settlement with your creditor, your credit score will have taken a severe hit. If the creditor reports the settlement to a credit bureau, it will drop even more.
If you have good credit but you’re struggling to meet all your expenses, you can probably find a better form of debt relief. But if getting out of debt is more important to you than maintaining a strong credit score, consider debt settlement.
Unsecured debts are the only kinds of debts that can be settled. This includes credit card bills, medical bills, and some personal loans. Mortgages, car title loans, or other kinds of secured debts – including secured credit cards – cannot be settled under debt settlement.
What to Know Before Settling a Debt in Maine
Before you jump at a debt settlement opportunity, consider all of your options. If another form of debt relief makes more sense for your situation, you may want to consider going down that path instead of debt settlement.
You also want to be sure that your debt is valid before you make a payment, even through debt settlement. If the debt is no longer active through the statute of limitations for collecting on a debt, then you don’t need to repay it – even without a form of debt relief.
Consider all your options before making a decision. If you’re still not sure what is best for you or your debt, talk to a professional. A debt relief professional can help you find the best way out of debt for you.