Household debt continues to rise all across Canada, but this is especially true in BC. In particular, Surrey and the surrounding areas struggle with their debt to asset ratio. On average, for every dollar they have of assets, they also have 38 cents worth of debt. This high of a ratio can make it very difficult to ever dig yourself out of debt.
While many can do it, others will not be so lucky. In these cases, consumers often rely on debt relief services to help tackle their debt issues. While there is a wide variety of options available, one of the most popular and potentially helpful is debt settlement.
To learn how to qualify for debt settlement, check out this article.
What is Debt Settlement and How Does it Work?
Debt settlement is a debt relief solution in which the borrower will try to come to an agreement with their lenders and creditor to reduce the amount of debt they need to pay back. For example, if you owe $10,000 to a lender, but feel you will never be able to pay it back, you may offer to settle the debt for $6,000 instead.
It’s important to keep in mind that there is no rule that says a lender or creditor has to accept your offer. But if it is a fair enough offer, there is a good chance they will. Now, you may be wondering why a lender would be willing to take less money, and the answer is quite simple. Most lenders would rather receive partial payment than either getting zero back or having to chase the borrower around for months.
Want to know how to negotiate a debt settlement on your own? Click here.
How to Get Started?
Debt settlements are usually done through a debt settlement company. Surrey and most large cities will likely have multiple debt settlement companies for you to choose from. So how does the process of a debt settlement work? Well, you will work directly with a credit counsellor to come up with an appropriate offer to send to your creditors and lenders. It should be an offer that not only makes sense for you but is also attractive for your lenders.
They will eventually respond with either an acceptance of your terms or a denial. If they accept, you will now only need to repay them the agreed upon amount, not the full total amount that you had borrowed.
Do you know what the true cost of borrowing is? Find out here.
Questions to Ask a Debt Settlement Company
Being that most cities will have numerous different debt settlement companies, how do you know which one to choose? On the outside, most may look the same but that isn’t always the case. There are some that are high quality and reputable and others who don’t have the best track record or are untrustworthy.
In order to weed out the bad ones and make sure you work with a good one, it’s a good idea to ask the right questions.
How Much Debt Have You Settled?
By asking a company this question, you will get a sense of how long they have been operating and how successful they have been. You want to work with a company that has some experience in the space and has successfully settled debt in the past. Also, be sure there is evidence of the information they tell you, it’s always best to be on the safe side when dealing with your finances.
For even more questions to ask your debt settlement company, check this out.
What Are Your Prices?
While you shouldn’t just always go with the cheapest option, it is a good idea to know the cost of working with a debt settlement company before you make any final decisions. You don’t want to be surprised with a high price you weren’t expecting when it’s too late to back out.
Also, be wary of companies that ask for your fee upfront. Reputable debt settlement companies won’t charge you until your debt has been settled. You should also get the number you are responsible for in writing, so the company doesn’t try to take advantage of you at a later date.
How Long Will My Debt Settlement Last?
While no lender should be able to give you an exact answer, it is a good idea to try and find out a time estimate for how long your settlement will take. This will often depend on things like how busy the company is, how much debt you have, and how much you are settling for.
How Does Debt Settlement Affect Your Credit in Surrey?
While it would be great if debt settlement didn’t affect your credit at all, this isn’t the case. Any time debt is reported as anything except paid in full, you are likely to see some negative outcome for your credit. Now, exactly how much your credit will be affected can depend on a number of factors.
Things like your total debt amount, what you settled for, and how the debt was reported can all have an impact. Depending on your situation, the impact can be fairly minor or quite large. Even still, a debt settlement will be less harmful to your credit than other solutions like bankruptcy or a consumer proposal.
So while a debt settlement will generally have a negative effect on your credit, sometimes this isn’t a bad thing. A lot of the time, it’s better to simply deal with and get rid of your debt and have bad credit than it is to continue struggling under a mountain of debt.
Take a look at this infographic to learn more about what affects your credit score.
Debt Settlement Solutions For You
Do you have a lot of debt and feel a debt settlement is the right solution for you? If so, reach out to us at Loans Canada and we can help find you a reputable and quality company in your area.