Unfortunately, there’s no quick solution to serious debt — and anyone promising you a way to get out of it quickly is probably running a scam. Regardless of the exact debt elimination strategy you pursue, it’s safe to say it’s going to take a while to tackle debt once and for all. This is true whether you try to repay it yourself or pursue a more structured debt relief program.
If you have $10,000 or more in debt, chances are you’ve at least looked into bankruptcy. But filing for bankruptcy will leave a dark stain on your credit for seven or 10 years.
One alternative to consider before taking such drastic measures is debt settlement. Here’s more on how it works and how long you can usually expect the debt settlement process to take.
Debt Settlement: How It Works
It’s helpful to know what debt settlement entails, as this will help you accurately gauge how long the process may take you. The first step is to speak to a consultant, to ask questions and make sure it’s a good fit for your finances. If you decide to proceed, keep in mind the only kind of debt eligible for settlement is unsecured — like medical bills, credit cards and some personal loans.
After enrolling in a program like the one offered through Freedom Financial Network, you’ll start making monthly deposits into a dedicated account you control. The exact amount of these deposits will depend on factors like your income and how much debt you’re carrying. It’s not uncommon for consumers to make these payments for a span of 36 months or so before the actual settlement process can begin. Again, keep in mind there’s no way to get out of debt overnight. It’s a process requiring continued commitment and patience.
Once you have saved up a certain percentage of your debt owed, it’s time to kick off the process of negotiating with creditors. As part of a relief program, trained negotiators will contact creditors on your behalf and try to get them to agree to accept a percentage of what you owe. Creditors may be willing to settle for less if you’ve previously missed payments and gone into delinquency if they believe the alternative will be you defaulting and them receiving nothing.
If negotiators are able to strike a deal, the money you’ve been putting into that account will go toward satisfying the terms of the settlement. This process will repeat down the line for your various balances. Ideally you will be able to settle debts for a portion of the original balance. While creditors are never obligated to say yes to a certain settlement — and may even counter-offer — they may also decide to play ball if they deduce it’s in their best interest.
After a settlement, the balance is zeroed out and lenders should report to credit ratings bureaus that you’ve satisfied that particular debt. You’ll be responsible for paying a fee to your debt settlement agency too, which often falls within the range of 15 to 25 percent of the balance.
From there, you can start to rebuild your credit standing and hopefully avoid racking up more debt in the future.
Expect Debt Settlement to Take Years
Now you’re probably wondering: How long does debt settlement take? The short answer: Debt settlement can take 36 months or longer to complete. Some people are able to settle in 24 – 48 months, according to Freedom Debt Relief. It really depends on how much debt you’re carrying into the program, the amount you’re able to deposit monthly and what your creditors will agree upon.
Debt settlement usually takes somewhere between 24 and 48 months, although exact results will vary. Make sure you know what to expect going in so you can adjust your expectations.
