Most Canadians feel a lot of pressure to manage their finances as best they can. Currently, the average Canadian consumer debt is just under $ 30,000. It is not surprising that in response to this, Canadians are trying to reduce or eliminate their debts before they become too high. Most people are familiar with traditional debt relief options, such as debt consolidation and financial tracking, but many forget an alternative option: debt settlement.
Debt settlement 101
The idea behind a debt settlement is to negotiate with your creditors and repay your debts in full but for less than you really owe. For example, you could negotiate with a certain creditor to pay them back $ 1,000 instead of $ 5,000 and they would report that debt as being paid.
Negotiate for yourself
When it comes time to settle your debts, you can take two paths: the professional way or the way Do-it-Yourself. Both work, but it is important to evaluate your situation and decide which is most beneficial for now and in the long run. In general, we recommend meeting with a professional before deciding to negotiate with your creditors by yourself. But if you ever decide to go DIY, here are some tips.
Follow a map
Settling your debts as quickly as possible should be your priority, the longer you wait, and the less understanding your creditors will be. You should aim to have completed the process within one year and at the longest, two years. You will have to evaluate your finances and decide how long it will take you to collect the money. With a debt settlement, creditors generally expect a lump sum payment and rarely accept smaller payments.
Know what the cycle of your collection agency looks like
Most creditors have their respective ways of handling overdue accounts, but generally, an overdue account goes through a cycle that looks like this:
1 Amortization extending to approximately 180 days past the due date
2 Sending to collection agency
3 Sending to a law firm
Understanding your collection agency’s cycle will help you better understand where your outstanding accounts are located within their system.
Find the necessary money
Once your debts are negotiated, you will still have to repay some of them, so you have to find a way to have a lot of money available. Saving and changing one’s lifestyle are two possible ways, but depending on your situation, it may not be enough. You could sell some of your assets that are not used or just not necessary. This includes: vehicles, motorcycles, boats, recreational vehicles, antiques.
Manage your emotions
Negotiating your debts by yourself can be difficult but know that you have to manage your emotions. Imagine it’s a business contract and not your debts. Do whatever it takes to manage your emotions.
Manage collections agency appeals
Depending on the number of overdue accounts you have, you could receive dozens of calls per day from collection agencies. Do not let these calls override your plan; use the available technology to better manage them. Send these calls to another line or directly to your voicemail, so you can listen to messages peacefully and call back at a better time for you.
Put your paper debt settlement plan on paper
No matter what arrangement you arrive at, you have to put it on paper. Especially when it comes to negotiated arrangements over the phone.
The benefits of a professional debt settlement
Debt settlement has a lot of benefits but it is not the only solution available to people in need of debt relief. A professional will evaluate your situation and you will find the best solution, whether it is a debt settlement or something else. Among others:
- Debt consolidation
- Financial follow
- Consumer proposal
- Personal bankruptcy
When negotiating a debt settlement, creditors will usually try to extract as much money as you can. Without the help of a debt negotiation expert, you could pay a lot more than you need to settle your debt. You can try to do it on your own, but with the help of a professional, chances are you’ll come to a better deal and pay less in the end.
Talk to a professional today
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