Debt settlement is when you and your creditor agree to a certain payoff balance. This amount is typically lower than your overall debt. The goal with debt settlement is to take steps that will pressure your creditor to excuse some of your balance in place of a lump sum payment.
For example, your creditor may accept a lower payment than what you owe by removing late fees and interest buildup. If you have stopped making payment on your credit card debt, the provider may call you about setting up a payment plan, a debt settlement, or selling your debt to collection agencies.
If your debt goes to a collection agency, they may also offer a payment plan or debt settlement amount.
If you have equity in your home, you might consider refinancing your home to put cash in your pocket. You can use the equity from your home to pay credit card companies and other lenders.
A reverse mortgage transfers the equity in your home into money today. You will not have monthly payments with a reverse mortgage. You can defer payment until you sell your house.
The total price of the reverse mortgage cannot be higher than the value of the house. So, if you get a reverse mortgage for $100,000, but the house only sells for $90,000, you do not have to pay the difference.
To qualify for a reverse mortgage, you must be at least 62 years of age. The three types of reverse mortgages include:
- Single-purpose reverse mortgages, offered by government agencies and non-profit organizations.
- Proprietary reverse mortgages, offered by private companies.
- Home Equity Conversion Mortgages (HECMs), which are federally insured by the U.S. Department of Housing and Urban Development (HUD).
The best way to handle your debt will depend on your credit and income.