Debt settlement is a useful tool for people who are currently behind their debt payment schedule. It’s considered an alternative to bankruptcy and will allow you to do away with most of your debt paying less than you owe. Fast debt settlements help you reduce debts and manage your finances better.
The American Fair Credit Council (AFCC), reports that debt settlement is to a great extent the cheapest alternative compared to credit counseling or offering minimum monthly payments. However, whether debt settlement programs will be the most inexpensive means for you to emerge out of your debt or not depends on your specific situation.
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What Is Debt Settlement?
Debt settlement is a process to reduce debts where you pay less than what you owe. It involves settlement negotiation with your creditors, either by you or a debt settlement company to reduce the outstanding balance. Subsequently, after negotiation, you arrive at a settlement agreement where creditors agree to forgo the remaining balance on the account in exchange for the partial payment.
How Debt Settlement Plans Help
A debt settlement plan is a professionally managed debt settlement process. You employ a company to negotiate settlements on your interest. Debt settlement plans let you:
- Reconcile your credit card debts quicker
- Pay below your outstanding dues
- Save dollars and avert bankruptcy
- Minimize annoying collection calls
How Debt Settlement Operates
You can handle settlement negotiation on your own or hire a debt settlement lawyer/ company to help you get through fast debt settlement to reduce debt. When you resolve debt with a company, you agree to pay less than your outstanding in return for the remaining debt to be exempted. Sometimes you can settle down at twenty or thirty percent of the actual amount that you owed. Debt settlement is only applicable on unsecured loans or debts like credit cards or personal loans that don’t require collateral. Since the company already faced difficulties during debt collection from you earlier, you must provide the negotiated sum as a single payment within the shortest possible time from the agreement date with the company. It is recommended to negotiate with only one company at a time. After settling one debt, you can begin the process over with your next debt.
Pros and Cons of Debt Settlement
With debt settlement plans you can get options for fast debt settlement to reduce debts. The negotiation can potentially help you get your financial life back in order. Debt settlement also lets you save money considerably. It also relieves you by allowing you an affordable option in the form of single monthly payment.
Debt settlement can impact your credit score by showing up on your credit report for some time as the debts will not state paid in full. You can handle one debt at a time, which implies that you may still seek to save money to repay your debts. You are required to pay taxes on the exempted debt amount. It’s essential to understand how debt settlement will impact your taxes and plan accordingly.
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Debt settlement may be the cheapest way to emerge out of debt for some consumers. It is dependent on a couple of factors, such as your outstanding dues, process duration, and how hard you might find it against other alternatives. Select a debt settlement plan after fully understanding its terms and conditions.