How to achieve 100% Debt Settlement With A Plan

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All debtors desire for debt settlements, but taking steps to get it done comes with a lot of challenges, as paying back is not as easy as when it was collected. However, there are simple methods you can adopt for debt settlement with ease.

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The tendency of becoming a debtor is with everyone. This is because we are limited by resources compare to big and numerous projects we desire to carry out, and disasters both natural and manmade we face, which often forced us to go borrowing. Though debt is not bad as long as it’s used for the purpose for which it had been obtained, with a good plan to pay back. However, what is bad is the excess accumulation of it. It can make us run into trouble by not been focused, being slaves of our creditors and disturb about how to settle them.

How to achieve 100% Debt Settlement With A Plan

Debt Consolidation

This simply means consolidating multiple debts into one debt stream. Debt consolidation doesn`t reduce your debt — it just simplifies payment by having only one creditor. While this may go a long way to help you keep track of payments, the main purpose in consolidation is moving higher interest rate debt into a single payment with more lower interest rate by one of these methods:


Consolidation loans are normally secured loans against assets (such as a home equity loan). If your credit rating permits for an unsecured loan, it`s a much better situation, as your assets will not be put at risk. The moment you close the low-interest loan, high-interest loans like credit cards can be paid right away.

Balance Transfers

Require opening a new credit card account with favourable terms (usually a short-term promotional rate) and paying off the old cards and other debt with the new card.

Don`t be fooled by the sudden appearance of much larger credit capacity. Desist from using this credit if possible, and use it sparingly if you must. Also, when extending the payment period, consider the time value of money as well as the interest rates.

Debt Management

Debt management companies, in your interest, prioritize and allocate your debt. Instead of settling in full the previous creditors and replacing them with a single debt source (loan or credit card), you are keeping the same creditors, but having one individual manage the payments for you with money you pay them from your account. It`s a form of debt consolidation — however only from your viewpoint.

Debt management companies exist either for-profit or non-profit, but they are not free. Even non-profits incur overhead expenses. They often attempt to negotiate better interest rates or lower finance charges with creditors, using their relative stability as leverage.

It can take up to three (3) to five (5) years to complete a debt management program, and possibly longer depending on your debt-to-debt ratio. Credit effects are reduced by successfully completing the program. Since a lot of your credit score is based on making payments on the stipulated time, … by just being in the [debt management] program, the bills get paid on time each month, and that has a really, really positive implication for your credit score.

Debt Settlement

Debt settlement is meant to reduce your overall payment amount. Debt settlement companies often advise you to stop making payments to your creditors and deposit money in a separate account for a future settlement.

The theory is that your creditors will eventually write off your debt as bad debt and take whatever they can get through the settlement company. Generally, they will, however, not guarantee that the settlement company can settle with every company. This may leave you with unpaid debt and significant charges.

Normally this is a quicker method of getting out of debt, but your credit score will be damaged for years, and may never return to higher levels. Since you have made a choice not to pay all your bills, potential creditors could decide you are an unacceptable risk.

All debt reduction methods are not free of fees; they have associated fees and/or closing costs, and some have tax ramifications with possible deductions or penalties, so consider this when doing cost-benefit calculations. Know that there are many fraud stars who try to take advantage of people in dire straits; dealing with such, you could end up with even more debt and more headaches.

Other simple ways (Strategies) you can settle your debts are:

Avalanche Method of Debt Settlement

This strategy, also known as debt stacking, enables you to pay off your accounts in order from the highest interest rate to the least. And you can achieve that in the following steps:

  • Step1: Make the minimum payment on all of the accounts.
  • Step2: Deposit as much extra money as possible toward the account with the highest interest rate.
  • Step3: The moment that debt is paid off, start paying as much as you can on the account with the next highest interest rate. Continue like that until all your debts are completely clear.

Each time you pay off an account, you’ll have more money to put towards the next one. And since you’re confronting your debts in order of interest rate, you’ll pay less overall and be out of debt more quickly.

Just like an avalanche, it might take a while before you see anything happen. However, after you gain some momentum, your debts (and the amount of interest you’re paying on them) will fall away like a rushing wall of snow.

Pros and Cons of the Debt Avalanche

Debt avalanche helps you pay less in interest – and will get you out of debt more speedily. With it, you`ll also have the satisfaction of seeing the highest interest rate disappear.

That`s why the debt avalanche will always be the recommended method for paying off debt. It makes it very easy.

Snowball Method of Debt Settlement

With this strategy, you’ll pay off your debts in order from the smallest balance to the largest.

Most people love this method because it includes a series of small successes at the beginning, which will give you the necessary motivation to pay off the rest of your debt. And you can achieve that through the following steps:

  • Step 1: Make the minimum payment on all of your accounts.
  • Step 2: Deposit as much extra money as possible toward the account with the smallest balance.
  • Step 3: The moment that debt is paid off, take the money you were putting toward it — and channel it toward your next smallest debt instead. Keep doing that until all your debts are completely clear.

In simple terms, take aim at your smallest balance first, regardless of interest rates. The moment that’s paid off, you focus on the account with the next smallest balance.

Think of a snowballing movement along the ground: as it gets larger, it can pick up more and more snow. Each conquered balance gives you more cash to help pay off the next one more quickly. When you settle all your smallest debts first, those paid-off accounts increase your motivation to keep paying off debt.

Co-join Balance Transfer of Debt Settlement

This refers to simple techniques you can use in conjunction with snowball and Avalanche methods. If you have credit card debt, one option is to transfer your credit card balance to a different card

If you have an account with a high-interest rate, for instance, you can simply transfer its balance to a card with a lower interest rate — and so spend less in interest over time. This is more like paying off one credit using another card. This agrees with the avalanche method since you can use a balance transfer to strategically minimize the interest rate on your highest-interest debt. That can allow you more time to focus on the next-highest interest account, and reduce the total interest you pay.

Most balance transfer credit cards even offer a 0% APR for an introductory period, which permits you to pay off your balance without incurring extra interest charges.

Let`s say you have $6,000 of credit card debt at an 18% APR. You may transfer that balance to a card that offers 0% APR for the first year. If you settle your debt fully in that period, you’d save more than $600 in interest.

 Or if you’re carrying credit card debt at an interest rate and have at least decent credit, you could qualify for a good balance transfer deal.

When you clear your debt, you can sometimes pay 50% — or less — of the original balance. You could, however, have to pay taxes on the forgiven amount.

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