Debt settlements are where the debt collection agency or creditor agrees to take a lesser amount than what is actually owed in order to eliminate the debt. It is very useful for paying off old debts for less money than what is owed and can save hundreds of dollars when it comes to paying off the debt.
Save Money First
When I pay off old debts using debt settlement, I pull my credit report, write the financial institutions and amounts for the bills I intend to pay off. Once I have a total amount, I save 90 percent of that amount. This is so that I can pay off the entire amount in one large payment. Financial institutions and debt collectors are far more willing to negotiate for a lesser amount when they know they are getting all the money at once.
Call
When I have my required amount of money saved, I call the financial institution using the phone number listed on my credit report. By using the phone number listed on my credit report, I am ensuring that I am calling the correct company.
Once I have the customer service representative on the phone, I tell the individual that I would like to pay off a debt. I tell them my name and the account number. Then, I ask them for the amount owed. If they tell me $2,000, I tell them I will pay them $1,000. From there, I negotiate back and forth with the representative until we arrive at an amount I am willing to pay. On a $2,000 debt, I can expect to pay off the debt with between $1,200 and $1,500.
Payment
It's always best to use a credit card for these transactions since credit card companies are more vigilant than banks when it comes to inaccurate and fraudulent charges. It's important because there's no written guarantee. The amount agreed upon is a verbal agreement that may or may not be recorded by the financial institution.
With that being said, I have been very successful in paying my old debts with a debit card. Of course, it's more of a risk, but since I don't have any credit cards, a debit card is the only way I can pay over the phone.
Once I've agreed on an amount with the representative, I give the customer representative the name on my card, the card number, the type of card, and the expiration date. I also ask for a receipt to either be emailed to my email account or mailed to me via USPS so that I have a written record of the transaction.
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