Combat Mounting Debts – Is Debt Settlement Really Worth Getting Into?

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Debt settlement is an effective way to eliminate debts. It is the process via which the debt settlement company negotiates with the creditor and settles a major portion of your debt. Debt collection companies take the onus of negotiating with your creditors so that you can get the peace of mind you deserve when it comes to the elimination of debts.

Debt settlement and credit score

Many people are not aware of the effects of debt settlement on credit score. Debt settlement can affect your credit score like bankruptcy however if you ask for a debt settlement, it will not affect credit score as much as skipping payments. Lenders will generally charge you fees and interest rates for the payments you have missed. The late fees and the balance of the debts that you owe will adversely affect your credit score. There are instances where your creditor will not accept the settlement offer that you make. They will sue you for the debts you owe them. At the same time, you may owe taxes on the debt that has been forgiven by the creditors.

What are the differences between debt settlement and debt consolidation?

Both debt consolidation and debt settlement are 2 major forms of financial support for individuals who are unable to pay their debts. Many consumers are confused between the two as they are often used a lot in the market. Experts say that debt settlement and debt consolidation are not one and the same thing. They have explained both the terms below-

  1. Debt settlement- It is the process via which a lump sum of the debts owed is paid with the remainder waivered. The process of debt settlement involves negotiations entered into with the creditor who agrees to accept a part of the debt owed and forgive the rest.
  1. Debt consolidation- This is a process where all your debts are collected and consolidated under a single umbrella. The repayment plan has reduced interest rates, and you can extend the tenure of the loan to repay the whole sum.

Make sure when you are making payments under both the processes, do not miss out on them. This will lead to an increase in delinquent accounts. Creditors generally agree to debt consolidation and settlement as if you file for bankruptcy; they will not get back their money. Creditors will opt for debt settlement and debt consolidation over bankruptcy.

Which one should you choose? Take specific points into consideration

When it comes to debt settlement, your creditor may or may not accept the offer made. If you can pay the creditor a lump sum of the loan, he or she often waivers the rest. The process usually entails your debt settlement company entering into negotiation with the creditor and creating a repayment plan. The plan generally extends over a period of time, and the money you pay is deposited in a savings account of the debt settlement company. When a lump sum accumulates, the loan is cleared off while a remainder of the debt is forgiven. The debt settlement company often charges a fee for the services rendered.

Understand the debt consolidation process with experts

Debt consolidation entails the services of debt consolidation companies who talk to all your creditors and consolidate small loans into a single loan. Here, the rates and the terms of interest are revised for the new loan. You need to make regular payments till the whole loan amount is cleared.

Agreements under debt settlement – understand terms and conditions well

When you are going in for debt settlement, you need to read the terms and conditions of the agreement carefully. Choose the company carefully after reading debt settlement ratings. Once you have gone through the terms and conditions of the agreement, you sign on it. Your signature implies you have agreed to all the terms and conditions listed in the agreement. This makes it a binding document.

Experts consider debt settlement to be a process where you can walk away with part of your debt forgiven. However, not all agreements are accepted by the creditor. Always remember, when you are making an offer to the creditor, write down the terms and conditions on paper. Get it approved by the creditor in writing. There should be no ambiguity when it comes to making the agreement.

What are the advantages of getting into debt settlement to eliminate your debts?

The following are the major advantages of getting into debt settlement-

  • Debt settlement helps you to reduce the amount of debt you pay to the creditor.
  • With debt settlement, you are able to avoid bankruptcy
  • You can eliminate creditor collection calls when you opt for debt settlement

The importance of checking credentials and experience

When you are looking for a genuine debt settlement company, check its credentials and certifications.  It is prudent for you to ensure that the debt settlement company you choose has experience and skills in the market. As mentioned above debt settlement does impact your credit score. This is why before you opt for it, contact experts and see if you are emotionally comfortable with it.

Choose experienced companies only for debt settlement

When you are looking for debt settlement companies, make sure that you choose companies that have been in business for many years. Such companies will have positive customer testimonials and reviews. Bank on them when you are looking for debt relief.  Ensure that the negotiators are well versed in the field of debt settlement so that you face no hassles with creditors. Read the terms and conditions of the agreement carefully so that there is no ambiguity at all. Sign on the agreement only when you have clearly understood it.

Therefore, if you are neck deep in debts and wish to eliminate tensions associated with it, debt settlement companies will ensure you get guidance on the process with success. Good companies will keep your interests in mind, bank on them to become debt free with time!

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