What Are the Pros and Cons of Having a Debt Settlement?

By | August 25, 2014

Debt settlement is one of the options for people who are hopelessly drowning in deep debt. It is a process of settling a debt which involves negotiating a lower pay off amount to resolve the outstanding balances owed to a creditor. Can debt settlement be considered as the best solution for everyone who is in debt? NOT REALLY!

In fact, there are advantages and disadvantages of having this. Before one decides to take this step, it is important for the person to weigh the pros and cons carefully first to evaluate whether this plan really suits his or her requirements.

Debt SettlementLet’s take a look at the benefits of having debt settlement. Firstly, you will be able to relieve yourself from financial burden. You will no longer be disturbed by the non stop calls and reminder letters from your creditors as well as debt collection agencies. You don’t need to worry about any legal action taken by your creditors which may lead you to bankruptcy. By having debt settlement, at least you won’t be struggling stressfully to look for money.

Secondly, a very solid benefit you can gain from debt settlement is MONEY. Through the negotiation with your creditors, you can satisfy your debt in full while paying lesser amount of your actual debt. This can definitely enable you to save a substantial amount of money at the end of the day. In general, some people can save about 40% to 60% of their money by getting professional debt settlement companies to manage their debts through negotiation with creditors.

Thirdly, during the negotiation process, the debtors could make their effort to convince the creditors to delete the negative information on their credit reports. As a result, the debtors’ credit report will no longer show an open delinquent item after the debt is settled. Some accounts will be noted as “closed by credit grantor” or “settled”. Some accounts may show that the debtors have undergone credit counseling. In other words, debt settlement helps to minimize the credit damage of a person.

On the other hand, there are also drawbacks of debt settlement. Your credit report will show that you have debt settled rather than debt paid in full. You may face a risk if you fail to get a written statement from your creditors stated that you no longer owe anything on the debt. Other collection agencies may send you reminder letters to chase for debt. You would definitely be very frustrated.

Besides, if you have signed up for a debt settlement program with a debt settlement company, it is normally compulsory for you to pay for an upfront to the particular company in order to enroll for this program. Besides, you are also required to pay additional USD20 as service charge monthly for your debt plan. These expenses are indeed an additional financial burden to the people who are suffering from debts.

Debt settlement may not suit everyone who is in debt. For those people who don’t owe huge debt, debt settlement may not be the right choice. There are alternatives which you can apply. Furthermore, bear in mind that it is not necessary for you to get the service from debt settlement companies. You can write off your debt on your own.

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