Debt Settlement
When your finances are a nightmare with debts galore, debt settlement may be the answer. This solution has helped lots of folks dig themselves out of the hole they’re in. Like all solutions, debt settlement has its advantages and disadvantages. Here is an introduction to what the term means and how it can help.
What Is Debt Settlement?
There is a lot of confusion about what exactly debt settlement is. Some companies use this term to mean debt consolidation, which is something entirely different. Others use it as a catch-all term meaning anything that provides relief from debts. What debt settlement actually means is paying off your entire debt in one lump sum. This is an agreement between the debtor and creditor, and it ends the debt once and for all.
The Pros And Cons
The biggest benefit of debt settlement (other than simply having it off your back finally) is that you can negotiate with your creditor to pay a reduced balance. In other words, by paying everything right now, you can pay substantially less than the actual amount that you owe. This is a win-win situation for both sides; you finally get the debt paid off, and the company gets most of the principle amount and doesn’t need to worry about pursuing it anymore. The main disadvantage is that very few of us have the funds to pay off our debts right now; if we did, we wouldn’t be in debt in the first place!
How Do You Get It?
A simple way to get started on debt settlement is to call your creditors and discuss with them the possibility of paying it off as a lump sum. The only catch is that, unless you’re way behind on paying back your bills, most creditors won’t talk about settling it. Oddly enough, even if you want to pay it off in good faith, they often won’t play ball. If you’re 3 to 6 months behind, you may have a chance.
Debt Settlement Companies
There are companies that will negotiate a debt settlement on your behalf, but you should be very careful in choosing these. Many of them will charge you very high fees to represent you, and some of them are not very reputable. If you choose to go with a debt settlement company, choose carefully and make sure they’re really working in your interest.
Is Debt Settlement Right For You?
Debt counselors don’t recommend debt settlement for most people. One reason is that it won’t help your credit at all. On the other hand, making steady monthly payments on schedule will not only get your debts paid off, but establish good credit for the future. If debt settlement is something you’d like to pursue, it’s a good idea to talk the option over with a non-profit credit counseling service and get some free advice first. Also, don’t borrow from another lender to pay for your debt settlement. For a loan like this, go to a good friend or family member. It doesn’t pay to sink further into debt.