The big question, is debt settlement a viable option? The answer, yes, debt settlement can successfully work for you. In this situation, the benefits outweigh the costs keeping you from making a long term negative impact on your credit score like bankruptcy can do. Debt settlement maybe your best option!
Debt Settlement Pros and Cons
Debt settlement is also known as debt reduction, debt negotiation, or debt resolution. Debt settlement is where a past debt is negotiated for less than owned and paid in a lump sum amount. Generally, the amount reduced is by half or more of the total, but these results can vary depending on circumstances.
When all sides have agreed, the negotiated settlement terms are then put in a contract. The debtor makes one lump-sum payment in exchange for the creditor agreeing that the debt is paid in full, and the account is then closed. However, some settlements are paid out over a few months. In either case, as long as the debtor pays per the agreement in the negotiation plan, no outstanding debt will appear on the debtor’s credit report.
Cons of Debt Settlement
Debt settlement companies will generally take a portion of the savings you have paid towards the forgiven debt as the fee for utilizing their services. Credit cards and other in-debt accounts could face going into collection after they are charged off. This typically happens after 180 days of nonpayment on the account. This is not always the most common route as collection agents only pay 5 to 20 cents on the dollar to purchase the debt from creditors.
Most creditors would instead settle for 30 to 60 cents on the dollar with the debtor directly. Your credit score may also be slightly impacted after the debt settlement process. However, it is temporary, and there should be significant increases to your credit score once you have successfully completed the debt settlement process. Likewise, creditors may make mistakes or violate your FDCPA rights and decide to settle for much less than you owe. Yes, we use the law to help gain more favorable results for our clients.
Pros of Debt Settlement
For so many of us, having that peace of mind regarding your financial situation is what a lot of the debt settlement companies can offer. Knowing that you have someone on your side every step of the way can help in the success of your debt settlement arrangements. It is worth it to have a team of experts working meticulously to help you regain financial freedom.
Most debt settlement companies have settlement packages that bulk together the debtor’s negotiated amounts to settle with the creditor for 15% – 60% less than the existing balances. Then there are debt settlement companies that can settle for up to 70% because they negotiate your individual balances with more attention and detail. The debt settlement companies work hard to develop and maintain relationships with the creditors to come to a settlement agreement on your behalf. A good settlement company works with the individual to protect them. These results can be achieved by using a company with good standings and practices such as Roundleaf. Good settlement companies will arrange monthly update calls, establish a plan where the debtor can miss a payment or two, or finish the program six months earlier if consistent with all monthly payments. One thing is for sure; a debt settlement plan may help you pay off your debt for much less than what you owe. We can show you how – just ask us.
After having read this article on the pros and cons of debt settlement, you will have the information necessary to make the best possible decision in settling your debt. Debt settlement is a great alternative, let Roundleaf and our professionals help put together a plan that best fits your current financial needs and pay your debts today. In addition to providing excellent services to our clients, we are passionate about focusing on educating consumers on how to manage their money best. Our experienced debt counselors can handle the settlements for you and, in most cases, help our clients become debt free in 24 to 48 months. That’s the kind of commitment you deserve!