Unsecured Debt Settlements

Written by Jill Morrison
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Unsecured debt settlements offer a solution to the overwhelming burden of heavy credit card debt. Unsecured credit cards are the most common type. Credit card companies give them to anyone with a decent credit record. No collateral is required, but many cards have an annual fee. Usually, the interest rate is higher than a rate given for a secured loan, such as a home equity loan. The majority of consumers with debt problems have credit card debt. Because of the extraordinarily high interest rates, this can be the most difficult type to get out of, since minimum monthly payments go largely toward paying interest rather than the actual debt.

Procedures for Unsecured Debt Settlements

If debtors have cash available, they can make an offer of a reduced dollar amount to settle an unsecured debt. Creditors will often agree to take 40 percent to 60 percent of the debt amount as payment in full. It often takes several letters before an agreement is reached. Negotiations can be complicated and difficult. Many debtors turn to settlement companies who provide complete professional service for a fee, rather than attempt to go up against creditors on their own.

Enrollment in a debt settlement program may have a short-term negative effect on a credit report, resulting from the closing of accounts. Once creditors report the account as settled, options are available to improve credit standings. Settlement companies often provide referrals to lenders who will help with re-establishment of a good credit reputation. All accounts included in the settlement program will be closed immediately. It typically takes around two years to become debt free.

Online settlement programs usually offer access to account information 24 hours a day. They should also provide support, guidance, and counseling. With the better companies, monthly statements are provided and customers often have the option to pay electronically and choose the most beneficial payment dates. Most services are dedicated to respecting privacy. Unsecured debt settlements are guaranteed to reduce the amount owed and provide harassment protection.

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