Debt Settlement Is The Process That May Benefit You Much But Damage Your Credit Scores Also
While you are swimming on the sea of debt you have to look for a way out. Many people is looking for the debt settlement as an option for getting rid from the situation. Some of the agencies or organizations there who will claim to provide you the opportunity to settle or pay off your debt with half of the amount or less than that you owe. But, it is not as simple as it is looking like. Debt settlement is not the easy matter with out having the pitfalls and/or the consequences. It is not the cup of tea for everyone.
Debt settlement the process of negotiating the debt amounts with the money lending organizations from where you have borrowed the loan with the help of a debt settlement company as the mediator. The settled amount is always be the less than the amount you taken actually from your lender. There are various types of debts that these debt settlement companies are taking into the considerations, such as credit card loans, personal loans, any automobile loans and different types of loans are there. But you need to know the debt settlement pros and cons unless which you should not take the steps for negotiating your debts with your lending organization or hiring the debt settlement company for the purpose.
Debt Settlement Pros:
- While you are settling your debt with the lender it will have the negative impact on your credit scores but the impact is not be as great as if you filed for bankruptcy.
- This is the cost-effective way to resolving your debt where you are not paying the full amount or the principal amount to your lender what you have taken actually from it.
- Debt settlement is the way to safeguard your valuable assets while you are facing the bankruptcy situation.
- You may get the option to pay your settled debts either in one shot or in some monthly installments that you can afford.
- Many times the negotiated amount could be less than 50% from the actual amount that you have borrowed from your lender.
- After settling the debts with your lender you may live the life without having any financial burden on your head.
Debt Settlement Cons:
- Usually your accounts must be 3 to 4 months delinquent or defaulter unless it won’t be negotiated.
- You will have to pay the Taxes for your settled debt amount.
- The debt settlement company that you are hiring for your purpose can charge a higher fee which you have to pay them extra apart from your debt amount.
- After your debt settlement your lender, collector, or the credit card company will report the debt as “settled for less than agreed” or “settlement accepted” which can damage your credit reports for next seven years.
- You may not been offered for any debt settlement agreement from your lender as it is fully on their discretion.
Debt settlement is a type gambling process. Your creditors have the full right to refuse the settlement process. Then you may be is a worse financial situation.