You will not always go through a debt advisor or a debt consolidation or settlement company to deal with your debts. It is permissible as per the federal law to deal with your debts all by yourself, whether you opt for a debt settlement or for a debt consolidation loan. However, you will have to be well conversant with the legal aspects so that you are confident enough to present your conditions as well as answer any questions that you creditors may ask you.
Remember, your creditors will never cross their limits or go beyond the laws of money lending at any point, whether it is for lending the money or collecting their dues. Therefore, rest assured that you are always well protected by the law and there will be no adverse effects when you want to deal with your debts on your own.
However, if you are now well conversant with the legal aspects then it is better to take help of a professional and even a debt settlement lawyer for that matter to be absolutely safe.
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A sensible approach
Often, settling your own due by you is a more sensible approach. The primary reason to say so is that:
- You will save a lot of money in the process as well as maintain an absolute control over the entire process.
- In addition to that, often it is seen that the creditors want to listen from the horse’s mouth so that they can set out the ‘horses for courses’ so to speak. They are often reluctant to settle a loan or even start a negotiation if you hire a professional to represent you in the process.
- Lastly, if you can afford to hire the service of a debt settlement company or an attorney for that matter, why would you not pay the entire loan amount in the first place? After all, they both will charge you for the amount saved or the services provided.
In the end, sometimes these debt settlement companies and even the attorneys are not able to get a better plan and option than approaching to your creditors on your own simply.
However, to tackle your debts yourself, you must do some research and know about the rules and regulations from the Internet. You can start by visiting different legal sites or other reliable and reputable sites such as https://www.libertylending.com/ and others to know your options and for other tips and advice.
Pitfalls to avoid
When you know the law well, you will know the pitfalls to avoid when you deal with your debt all by you.
- First, you have to make sure that the conditions are favorable for such a move because opting for a debt settlement or a debt consolidation loan will mean that you will still have to make payments for your loan, though the monthly payment amount may be reduced this time.
- Next, you have to know that your creditors are not suing your already for non-payment, which is permissible as per the law, mind you. However, once again as per the law the creditors cannot harass you to make payments. In both these cases it will be more productive if you go through an attorney.
- Follow this up by looking in to the pros and cons of the specific approach you want to take. As for debt consolidation loan which is a larger loan with a low interest, there will be no adverse effect in your credit report as the total amount outstanding will not be reduced. It is only the number of loans that will be reduced by rolling all your debts into a single loan with lower interest rate.
- On the other hand, the fact that your final amount of payment will be reduced in debt settlement will reflect in your credit report as a negative. Moreover, the amount that you may save can be considered as taxable income by the IRS or Internal Revenue Service. Therefore, you may end up not saving much in the process.
Next up, know the ways in which you can increase your chances of successful negotiations. This you can do by knowing the common mistakes that you should avoid before, during and even after the negotiation.
Secured or unsecured debt
No matter whether you go for debt settlement or consolidation, the first this that you should know is the kinds of debts. Ideally, there are two kinds of debt: secured and unsecured. This knowledge will enable you to know whether you are dealing with a secured creditor or an unsecured creditor.
- Secured creditors are those who have some sort of collateral security on your loan. It can be your car, boat, house or land. If you do not pay up, the creditor is allowed as per the law to take your property. If you are okay with it then negotiating hardly matters.
- Unsecured creditors on the other hand are those who lend money without any security. If you do not pay up they cannot take up the merchandise you bought with the loaned amount.
If you know this difference, you will not be fooled by any creditor as a few of the unsecured creditors may convince you that their loan is secured.
Know the strengths
It is always better to take on a negotiation by knowing the strengths of your creditors. Well, the obvious strength of a secured creditor is that they have the legal right to repossess your property that you gave as collateral.
Unsecured creditors will also have a few strong pints in other positions such as:
- They can send your account to collections. They will call you up and even send letters but as per the law they cannot harass you by calling during odd hours.
- They can even sue you as per the law for breach of contract that you signed while taking the loan.
- They can also garnish wages if they win a lawsuit against you and can even levy bank accounts to enforce the judgment.
Therefore, you must make sure that you stay strong when you negotiate or get help of a professional.