If you're considering debt settlement, you probably have dozens of questions about how this debt relief option works. Here are answers to some of the most common questions.
What is debt settlement?
Debt settlement is a process that lets you pay a percentage of your outstanding debt after negotiations with your creditor. As a ressult, the creditor cancels the remainder of your debt. For example, your creditor might settle a $10,000 debt for just $4,000. The creditor cancels the remaining $6,000. Specific results vary by creditor, but debts are generally settled for 10% to 75% of the outstanding debt.
A Good reason to consider debt settlement would be if you're experiencing financial difficulty, you can't pay off the debt on your own in 2-4 years or you're on the brink of bankruptcy.
Which is better, debt settlement, credit counseling or debt consolidation?
The best option depends on your specific situation. Debt settlement has some benefits over credit counseling and debt consolidation. In some cases, your debt settlement payments can be lower than those on a credit counseling agency's debt settlement plan. Debt consolidation also requires a higher credit rating than settlement.
Why do I need a debt settlement company? Can't I do this on my own?
Sure you can if you have the experience and expertise to do so. The negotiations, details and regulations are complex and can be confusing for most people Our experts what it takes to negotiate successful settlements with creditors. Plus, you generally must be disciplined in saving up for a settlement. If you miss payments or dip into your settlement savings, your debt settlement progress likely gets set back.
Does debt settlement ruin my credit?
There is potential damage to your credit rating. In fact, federal law requires debt relief companies to let you know any negative consequences of debt relief. Your credit rating can be negatively affected if you go through debt settlement. The specific damage you receive depends on several factors, including your credit rating at the time of debt settlement.
Debt settlement will only remain on your credit report for up to seven years. Fortunately, you can work on improving your credit score as soon as you've completed the settlement program.