Let us consider a hypothetical situation. If you have a credit card worth $5000. Then to repay the same, you will have a certain amount of interest with it as well. There are several ways by which you can pay the loan efficiently. However, if you are not ready to pay back the amount because you are strapped for cash. Or, are skeptical to pay off the entire balance, then can you waive it off? Yes, you can do it through debt settlement and debt consolidation. To make the process faster and smooth, you can consult firms dealing in debt settlement in New York and debt consolidation in NYC.
How does debt settlement work?
Debt settlement is an agreement of one-time payment towards the balance amount while waiving off, the rest between the lender and the borrower. Firms concerning the Debt settlement in New York offer this service to resolve or settle your debt by negotiating the amount of money you owe even on your credit cards. They can reduce the balance amount to 50% to 70%. According to American Fair Credit Council, consumers who complete a debt settlement program can reduce their debt by 45%.
Debt settlement and debt consolidation are similar in a way but different at the same time. They aim at waiving the loan of the lender but differ in strategies. However, debt consolidation is the process of taking out a single loan to pay off multiple debts. So, it is a way of reducing the debt burden by cutting the total number of creditors you owe. Hence, paying monthly debt on only one loan, not many. And even though these methods can prove to be financially draining for some, a report by American Fair Credit Council (AFCC) revealed that 95% of clients saved money after fees.
Status of the Industry
According to Super Money, the US debt settlement industry comprised 226 privately owned firms in the quarter ending 2019. About 67% of the 14 companies dealt with debt consolidation. A report by John Dunham & Associates establishes, debt settlement companies settled approximately 902,449 accounts. The same report manifested, the debit balance of clients reduced from $5.1 billion to $2.5 billion. On average, $2,727 amount of debt resolved. You must be wondering how much revenue these companies earn. If we go by the study of 2018, then these debt settlement companies charge about 22.2% of the enrolled amount provided that they negotiate to reduce 55% of the client’s debt. As a result, after settling the debt amount of $4.48 billion at the same rate, they earned approximately $994 million in fees.
While analyzing the impact of the industry on the economy, it is surprising to know that the economic output of this industry is $2.7 (estimates by John Dunham & Associates). This consists of the people recruited in the organization, $1.9 billion in wages, and a tax of $659.6 million. In the US, credit card debt consolidation is almost equal to the total credit card users. Prime reasons for debt consolidation are consumer loans (35%), household expenses (19%), and medical expenses (9.9%).
When estimating the growth of the industry, data shows that it has great potential. The number of credit card users has been on a rise and with that, the card delinquency rate has increased by 21% from 2018. In 2020, the unsecured personal loans had a delinquency rate of 3.04%. The share of such unsecured personal loans and credit card debt is majorly managed by the debt consolidation companies. You can also consult some firms that deal with debt settlement and debt consolidation in NYC to safely and legally manage your debt. Since paying off debt might sound attractive and disburdening. However, they come with their perks. If you want to keep your credit score and future costs intact, consult professionals via the firms.