What are the pros and cons of debt settlement?
As you try to determine how to settle debt most effectively, you may be considering debt settlement programs that propose to wipeout your debt for a small portion of what you owe. Before you contract with a debt settlement company however, it’s important to understand the pros and cons of debt settlement, as this approach to managing debt is not always what it’s cracked up to be.
To understand the pros and cons of debt settlement, it’s helpful to understand how debt settlement works. In a nutshell, you’ll stop paying your creditors for a number of months until the amount you owe has become pretty large. At that point, the debt settlement company will try to get your creditors to settle your debt for some smaller amount. If your creditors agree, you’ll make that debt payment along with a sizable fee to the settlement company and any taxes owed on the amount of debt forgiven.
So, what are the pros and cons of debt settlement? On the positive side, debt settlement may help you pay off your debt for much less than what you owe. On the negative side, your credit rating will be impacted. How bad does debt settlement hurt credit? It may take as long as seven years for you to restore enough credit to get a loan, rent an apartment, buy a car, or get a mortgage.
Another downside to debt settlement: you may end up saving only a small amount of money or actually owing more. Your creditors aren’t required to settle your debt, and they may choose instead to take you to court or turn matters over to a collection agency, which will add to your financial woes.
ACCC: free credit counseling on the pros and cons of debt settlement.
When you want to know more about the pros and cons of debt settlement and to get answers to questions like “How does debt settlement affect my credit?”, the certified, professional credit counselors at American Consumer Credit Counseling (ACCC) can help. We are a not-for-profit organization whose mission is to help consumers just like you get out of debt quickly and learn to better manage finances to stay out of debt in the future.
We offer free credit counseling services where you can meet with a highly trained credit counselor to take stock of your situation and look at all the options available to you. Our counselors can explain the pros and cons of debt settlement, help you understand the process of debt consolidation vs debt settlement, and point you toward additional resources you can use to learn more about managing money effectively.
The pros and cons of debt settlement vs. debt management.
As you consider the pros and cons of debt settlement, you’ll also want to look at the advantages of a debt management plan. This technique for getting out of debt involves getting help from a company like ACCC to set a budget you can live with and plan to pay your bills on time. With ACCC, you can make one monthly payment to a special account, and our team will use that money to pay your bills on your behalf each month, ensuring they are paid on time. This not only simplifies your financial life but gives us the opportunity to talk with your creditors about ways to reduce interest rates, lower monthly payments, and waive late fees and over-limit charges. Most people who enroll in a debt management plan with ACCC can pay off their debt within five years.