Christian Debt Recovery

Cnn Credit Card Debt Calculator

September 13th, 2008 |

Author: Gavin

Why Debt Settlement Works

Most Americans have heard the saying only two things in life are guaranteed, death and taxes. I’d like to add one more to that old saying…and DEBT. For most Americans debt is probably the scariest and most overwhelming of the three. The economy is slow, mortgage payments are high, credit cards bridge the gap between paydays and good paying jobs are scarce.

When consumers are overburdened with unsecured debt they have a couple of options. First, they can continue to make the minimum payments and not charge another dime. By making the minimum payments only, it will take 25 years and 3 months to pay off $15,000, and you will pay a total of $19,691.97 in interest (for this example the interest rate was 18%). You can click on the link provided to see how long it will take to pay off your debt, http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp

The Most common option is to visit the local bank and ask for a consolidation loan. Banks heavily advertise the consolidation loan as the best solution, please consider the following bit of advice and look at the current interest rates on personal loans available a http://www.bankrate.com. Here you can shop around for the best rate, in Los Angeles California the going rate for a personal loan is anywhere from 15%-22% depending on your credit score and debt to income ratio. While most consumers believe their credit score is the only criteria banks look at before they make a credit decision the truth is they will also look at the total amount of debt outstanding and how much more of a risk you will become with the new loan. When the bank disperses the payments directly to the creditors your credit card accounts will be at a zero balance and the bank knows that they can not control a consumer from charging on those cards the day after payoff. With today’s poor economic conditions and the credit crunch good luck getting a consolidation loan at a decent rate, especially if you do not own a home that can be used as collateral.

Another common solution that can help manage your debt is to sign up for a credit counseling program. This is a good option for those who are still able to keep up with their minimum payments. However, if you are behind on payments, the credit counseling payments will roughly be the same if not higher after the monthly service fee is charged. Not to say that credit counseling is not an option. Credit counseling programs will lower you current interest rate. The only down side is that creditors will notation your credit file stating that you are receiving third party assistance in repaying your debts. That footnote may hinder financing down the road, while some financial institutions see credit counseling as a positive thing while others may not.

If all of the above methods of debt relief are not available, there are other alternatives before bankruptcy. Debt Settlement is defined as an aggressive approach to debt reduction for clients with a serious amount of unsecured Debt who are considering Bankruptcy. Make sure the settlement company you choose has an attorney network that reviews all cases and provides consumers with full disclosure of the terms and conditions. Beware of settlement companies that do not have an attorney supervised program. These companies have nothing to loose if they complicate matters. However, attorney supervised networks risk their State Bar licensing should they make false or misleading claims.

The sequence of events for a true debt settlement is as follows. Once enrolled in a debt settlement program you will be asked to commit to a certain minimum payment every month that will be set aside in a special “settlement account”. Most agencies refer to these accounts as escrow or trust accounts. Every month funds a are debited from your existing checking/savings account and transfer directly into the FDIC insured Settlement account. Once your debt settlement company has received the first three payments the law firm will send letters to the client’s creditors stating they are being represented by an attorney.

As the months go buy and assuming all settlement deposits are being made, and 45% of the lowest single debt has been accumulated then a settlement offer should be reached for hopefully no more than 45%. This process is repeated until all creditors are paid off and debts become settled at that point. Creditor accounts will be settled by the law firm one at a time unless the client has enough funds to settle more accounts.

Fees for a debt settlement program are typically calculated by taking a percentage of the total debt amount. For example you should expect to pay roughly 12%-25% for a debt settlement company to negotiate your total debt load. If you owe $20,000 and are paying 15% for the service you should expect to pay $3000 for the service. This fee is generally referred to as a service fee, and if the settlement company is a reputable one, they will not ask for this money upfront in a lump sum, it should be spread out over 18-24 months depending on the length if the program.

If you are thinking about going through a debt settlement and want to get out of debt quickly, and for less money make sure you research the company. Make sure they there is no negative information on the BBB, and that they have an attorney network supervising the entire negotiation process. For a qualified and reputable debt settlement company contact Esignow at 888-558-0989 they will point you in the right direction.

About the Author

Guillermo Santomauro is the Director of Operations for software provider Esignow. He is currently involved in consulting work for the Debt Settlement Industry. He has extensive experience in the field of debt management and finance. He is a graduate of the California State University College of Business and Economics, Los Angeles. His career began in the banking Sector as a premier consumer and business banker. A few years later he worked as Senior Sales Manager for a student loan corporation with over 120 employees. He oversaw the Private Educational Loan department and Federal Student Loan Consolidation department. Guillermo went on a year later and helped launch a successful Consumer Credit Counseling and Debt Settlement firm in the Los Angeles area. He is now focusing his talents and efforts for Esignow, a leader in electronic transaction processing and software interface creation for multiple industries.