How much money will I save by using a debt agreement?
First off, never look at a debt agreement as a way to save money – although saving money is the likely outcome of a debt agreement it is high recommended that you avoid one if your sole intention is to save money. Debt agreements carry serious implications including an appearance on your credit file – you will be unable to borrow more money during the debt agreement period (3-5 years) and the record will stay on your credit file for 7 years. You will also appear on the NPII (national personal insolvency index) for life, although you should be able to start borrowing again once your debt agreement has finished.
You should only consider entering a debt agreement if you are struggling under the weight of debt, you have exhausted your other options (budgeting, debt consolidation, informal agreement with creditors) and you are contemplating bankruptcy because you are unable to pay back your debts as they fall due (which is far worse).
When you enter into a debt agreement, you and your creditor are agreeing to one of a number of things. You are agreeing to pay less than the original amount, to pay the monies back on a altered payment schedule (which is made based on what is affordable for you), and the possibility to transfer property to satisfy all or part of a debt.
Nevertheless, the fact that interest is usually frozen can save you money. There is also the fact that you can settle for a lesser amount, which can also save you money (if your creditors agree). Individuals who enter into a debt agreement usually save hundreds or thousands of dollars, depending on how much debt they owe.
There is not really one amount that is universal amongst everyone who uses the debt agreement to get out of debt. One person may owe $10,000 in debt and another may owe $50,000 in debt. Obviously, the individual who owes $50,000 is going to save more than the person with $10,000 just because the number is larger. For example, the person with 50,000 in debt may save 25% between the lowered payments and the frozen interest. This means they will save $12,500. 25% of 10,000 is $2,500. Nevertheless, money saved is money saved. Every little bit helps.
So contact a debt settlement company to help you develop your proposal and submit it to your creditors. It is not guaranteed that all creditors will accept the agreement. It is only required that a majority of them accept the agreement.
Just know that the debt agreement is a possibility so that you don’t have to do something drastic such as file bankruptcy. Once you have your debt resolved, you can then work on repairing your credit.
Other Question Categories
|
Credit Card Comparison