How To Use Debt Settlement Agreements To Your Advantage

It is an unfortunate truth that when debts become too much to handle, the temptation to file for bankruptcy is too much to resist. But it is important to know that there are alternatives to that course of action, and one of the most effective is to seek a debt settlement agreement.There are definite advantages to choosing settlement rather than bankruptcy, not least because the long-term consequences are much less severe. However, there is a certain skill to negotiating settlement terms, which is why hiring professionals to take care of things is a wise move.But what are the steps that should be followed when taking the debt settlement route? And are there ways to enhance the effectiveness of the move? After all, settling the debt is the best first step towards rebuilding a credit reputation.Advantages Of A SettlementSo, is a settlement really worth the effort? The simple answer to that question is yes. By reaching a settlement with your creditors, your debts can be cleared but at only a fraction of the full amount. In fact, a very good debt settlement agreement will see the amount required to pay fall to just 30%.That means that in every $1,000 owed to creditors, just $300 is paid, thereby making sure a significant amount of cash is saved. As a result, all of the financial pressure is lifted, and a large amount of income is freed up to actively rebuild your credit rating with.Of course, generally speaking, the individual may be happy at negotiating settlement terms that reduces the sum paid to 60% or 70% of the full amount. But by hiring a professional debt settlement company to take care of matters, the savings can be much higher – even if a fee must be paid for their services.Why Creditors Agree To ThemThe key question, of course, is why creditors would agree to such major reductions in the sums of money owed to them. Certainly, agreeing to a debt settlement agreement that sees the sum paid fall to 30% what is owed means the creditor makes significant losses. So why agree to it at all?The simple fact is that the negotiator offers a little-or-nothing deal, so if the creditors refuse it, then bankruptcy is filed and the creditors get nothing. Logically, it is better to get 30% of the due payment and cut their losses than to get nothing at all. Of course, negotiating settlement terms like this requires some tough-skinned negotiator.There is an advantage in staying out of the negotiations, and allowing a professional to deal with everything. The fear of not getting any reduction means many individuals fail to secure their potential savings.  Professionals play hard-ball, so a better debt settlement deal is almost certain.Getting The Best SettlementSo, what is required to secure the best possible debt settlement agreement? Well, the first thing to do is make clear to your creditors they can forget about securing 100% of the money owed to them. This is a strategic move, requiring some tough skin.The professionals advise their clients to refuse to make any loan or credit card repayments for a period of at least 6 months, thus establishing sound reason to claim an inability to pay the full amount. This is an essential element with negotiating settlement terms; creditors must believe they cannot get what they want.Remember, that with debt settlements, the best terms also come with a condition that the agreed amount be paid in one go. So, even if the $1,000 debt is reduced to $300, the deal only stands if the $300 is available to pay in one go. So, have a lump sum to hand before any agreement is reached.