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Four Tips to Remember in Debt Settlement

So you have major debt to contend with? Join the club. Everyone from Uncle Sam to Donald Trump to even your old buddy Michael Jackson has had to contend with debt settlement. The fact of the matter is that you are probably not as bad off as you might think. Are you five thousand dollars in debt? Try $50,000 in debt. Do you have to borrow payday loans on a regular basis? Try begging for change on the street. Have you had to slice up your credit cards? At least you havenít filed for bankruptcy! There is still time for you to recover from heavy debt and all it takes is a little patience and strategizing. Take these four tips to heart.

1. Start Doing the Math

Whenever you are struggling with debt settlement, the basic solution still remains the best: formulate a planóeven if itís very long-termóand stick to it. Organize all of your expenses into controllable and non-controllable categories. Organize your income and determine how much money per month (or per paycheck) you can afford to spend. Make sacrifices along the way, always keeping your eyes on the objective: to escape debt, fix your credit and have a clean slate once again. Debt counseling services charges hundreds of dollars to teach you this very basic information.

2. Do Not Pay Up Front Costs

Many debt settlement companies will promise to negotiate with your creditors for a substantial discount. However, they may ask you to pay upfront costs, everything from their fee to a huge consolidated settlement. (Or they may offer you the option of paying installment plans.) Simple question: what for? You are the one coming up with the money to pay off the debt. These agencies should only be paid after they negotiate a new consolidated balance. Otherwise, youíre just paying them to try. Moreover, thatís hardly motivation.

3. When in Doubt, Refinance

On the subject, many of those debt settlement agencies may be a major waste of time. If they are promising you a consolidated balance then ask them what they can do for you that you canít already handle on your own. Theyíre going to negotiate with your creditors? You can do that by yourself. Most creditors tend to be inflexible anyway when it comes to negotiation. The best you can usually hope for is for the company to drop the interest if you pay a lump sum. Well, where is that lump sum coming from? Are you going to pay the debt settlement company $700 a month just to negotiate and wait for you? They will probably claim that by paying them you can stop creditor harassment?

Trust us, it wonít stopóbill collectors usually have no contact whatsoever with many so-called debt relief companies. If you want to stop creditor harassment then talk to a lawyer that specializes in these matters. The best reason to work with a debt settlement agency is if you want to refinance the loan. This gives you the real advantage, as it consolidated all of your accounts into one easy to manage loan, negotiates the reduction of interest charges and carries the loan for you.

4. Donít fall for bad credit loans.

Youíre in this position because you have mismanaged credit. Thatís the painful truth that you have to confront. What you see as an opportunity in bad credit loans or bad credit revolving credit cards, is actually another trap that could land you into even greater debt. Some of these companies may even try to subject you to predatory lending rates and borderline illegal interest payments. Resist impulse buying and focus on paying off the credit you have used. You can restore your credit this way and put this debt settlement behind you forever.

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