Have you ever taken out a loan or two, only to find yourself overwhelmed by debt after a while? Debt settlement offers much-needed relief not only from creditors and debt collectors but also for your financial well being. That why it is good to explore the pros and cons of debt settlement.

We all make financial mistakes and sometimes the debt that we have gotten ourselves into 10-20 years earlier in our lives is still a heavy burden to us today.

It can be hard to imagine what life would be like without debt and financial hardship but if you can get there, most people you ask will say it is well worth it.

Credit card loans are some of the leading sources of debt in America today.  This is closely followed by student loans, personal loans, and car loans.

According to a survey, the average American has around $38,000 in debt, excluding home mortgages. Alarmingly, this figure keeps rising.

If you’re struggling to keep up with your loans, now might be the right time for you to seek the help of a debt settlement company.

Here’s what you need to know so you can get out from under the weight of your debt and live free financially once again!

What Is a Debt Settlement Company?

A Debt Settlement company (also known as debt relief) acts as the intermediary between you and your creditors. They contact your creditors on your behalf and negotiate a much better payment plan so you can resolve your debts in a shorter amount of time for less money.

These companies will also advise you on the various options available for you in terms of debt management. They will discuss the pros and cons of each so that you can make an informed decision.

How Does Debt Settlement Work?

If you want to know exactly how debt settlement works?

Debt settlement is a program where you enroll your debts that you cannot afford to pay what you owe into.

If your debts qualify for the program, then you will be granted a dedicated savings account.

This account is based on your total debt amount that is enrolled and how much you should be saving in order for the debt settlement company to start the negotiating process with your creditors.

If there are enough funds in your dedicated savings account then the negotiators can then start to negotiate down your debts with your creditors on your behalf.

Sometimes this is one lump-sum payment, while other times it is through a payment plan with your creditors.

Once your debts have all been settled, then you are ready to start fresh on your new chapter financially!

Here are the pros and cons of debt settlement

Pros and Cons of Debt Settlement

When it comes down to it, what are the pros and cons of debt settlement?

Well for starters, Debt settlement has several benefits.

It is, without a doubt, one of the quickest and most cost-effective ways to get rid of that stubborn debt without having to declare bankruptcy.

You will be able to have a good night’s sleep while being in control of your finances.

Once in a debt settlement program, you can be debt-free in as little as 12 months or 3 years.

This will depend on the much you owe, the number of creditors, and how much you save in your debt repayment account.

No matter how long it takes to pay up your debt, you cannot compare it to the stress you will experience when you’re unable to keep up with your debts on your own. Here are some more pros and cons to consider.

Debt Settlement Pros

Let’s start with the pros.

In a debt relief or debt settlement program, you typically have one lower monthly payment that you can afford to pay, and throughout the program, when you resolve your debts, you’re settling your debts typically for less.

Debt settlement comes with a number of benefits. It can be the first step to financial freedom.

When you settle your debt through a debt relief company, you will be able to do the following.

Lower the debt: Settling your debts through debt relief, or a debt settlement company could resolve your debts in a shorter amount of time.

Your debt settlement company will negotiate a settlement that is lower in comparison to what you currently owe your creditors. You will only pay the amount agreed to in the settlement and nothing more.

When you enroll into a debt relief or debt settlement company, they negotiate down your debts on your behalf with your creditors, so that way you can settle your debts for less.

Nothing happens overnight, however, in a few short years, or even months, you may be able to have your debts resolved and paid off for good.

Avoid bankruptcy

Settling your debts may be a better option than filing bankruptcy, depending on where you’re at financially.

Everyone’s financial situation is different, so that would be something that you would have to talk with a debt expert about to make sure that debt relief or debt settlement is the right option for you.

Filing bankruptcy is never an easy decision because it means you might have to lose some of your assets.

It important to take note that debt settlement does allow you to keep your assets and repay your loan comfortably as well.

Settling your debts may be a better option than filing bankruptcy, depending on where you’re at financially.

Everyone’s financial situation is different, so that would be something that you would have to talk with a debt expert about to make sure that debt relief or debt settlement is the right option for you.

Get the debt collectors and creditors off your back: Being hunted down by your creditors is never a good experience.

A debt settlement program can help you live stress-free once again.

Get out of debt fast: Debt settlement is one of the best and fastest way to get out of debt.

The trick here is to save as much as you can for a repayment as soon as you have contacted a settlement company.

Enjoy a flexible payment arrangement: The company will negotiate a specific amount of time to clear your debt.

This can go up to 5 years. The best thing about this is that your debt will not accumulate any additional interest charges once the agreement is made.

The Cons of Debt Settlement

The pros and cons of debt settlement are what you need to look at and that unfortunately means the cons as well.

Ok, so here are the cons.

Many factors affect the success of your debt settlement.

These may be completely out of your hands. Here are some of the risks involved in this program.

1. The Creditors May Refuse To Negotiate

There is a possibility that your creditors may refuse to negotiate.

However, your creditors will most likely be willing to take some sort of settlement offer from you considering something is better than nothing at all.

Dave Ramsey talks about the point that creditors will most likely settle with you in one of his youtube videos giving the example that, “If I’ve got a guy that owed me $40,000 and he didn’t pay me 15 Years ago. If he calls me up today…and says, I’ll give you $4,000 for that $40,000 debt that I owe you. Would you settle it? I would say..YEAH!”

 

 

2. It Could Negatively Affect Your Credit

You should start saving more money each month into a separate savings account, so that you will have enough funds saved up for the companies negotiators to use those funds to negotiate a settlement with your creditors on your behalf.

In some cases, people stop paying their creditors in order to have enough funds saved to settle their debts.

Unfortunately, if you do miss payments then they may end up showing up on your credit report.

If you are wondering how long will a debt settlement hurt your credit report? A settlement can stay on your credit report for up to 7 years.

But the good news is, having your account say settled has less of a credit impact then if it were to stay unpaid.

And moving forward, if you were to continue to have good credit behavior then your credit will slowly begin to improve.

It is important to take into consideration that if you have a high debt-to-income ratio currently, that may already be keeping you from getting a loan, even if you have a good credit score.

If a settlement takes longer to make due to not enough funds saved up to negotiate then you could run the risk of getting sued by your creditors.

However, some of the best debt settlement companies offer a litigation option for protection against this.

3. More Debt and Taxes

Late or delayed payments attract fees and interest. If you do stop making payments and your creditors fail to reach an agreement, you might end up paying more than you should have.

If there is an agreement, the forgiven debt can be considered taxable income and you may have to pay taxes on it when you receive an IRS 1099-C cancelation of debt form.

Depending on how much you are able to save when you make a settlement, the amount you may have to pay on your canceled debt may be very minor to the end goal of resolving your debts.

This is true if when you compare how much you are already currently paying for interest rates on your loans or credit cards each month.

4. Settlement Fees

A debt settlement company is not able to charge you an up-front fee.

However, if your debts are settled and you’re using their negotiators and their program, then you may be charged a fee for settling your debts.

For example, if you have more than 2 creditors and only one has agreed to settle, you will have to pay the settlement fee for that one creditor, the first repay installment, and the loan installment for the remaining creditor.

Debt settlement and debt relief companies should not charge you a fee until they have reached a settlement agreement that you have agreed to.

However, they are still a business and you’re using their top negotiators to settle down your debts with your creditors for less.

Although, you can settle your debts on your own without a fee, going with the right debt relief or debt settlement company that can get you results, may be worth it.

Now you know everything about what the pros and cons of debt settlement are. So what happens after debt settlements is exciting. Because you now have your debts resolves and it is time to get back on your feet!

What to Do After Debt Settlement?

After you have settled your debts and have completed your debt settlement program you than can start rebuilding your credit score back up.

You will have to make better choices when it comes to managing your money so that you can counter the negative effects made by your past debts. This means that you need to start building your credit immediately.

Here is what you need to do:
• Try to have no more debts or keep them to a minimum
• Do not sign up for a new credit card or open a new account for at least 6 months
• Make all your payments on time
• Maintain your old accounts and keep them in good standing open
• Make sure your credit utilization ratio is below 30%

Once you have completed paying up your debts, including any debt of the settlement program, you can open a secured credit card.

This will show that you are responsible and that you are able to make monthly payments on the account. This will also help with rebuilding your credit.

Be carefully that you do not go back into debt and repeat the process all over again.

What to Consider When Choosing a Debt Settlement Company

Dealing with debt can be challenging. However, it is important that you choose the right debt settlement company.

Here are some features to look for when making your decision:

• A company that offers you a loan to help clear out your current debts and will work out a payment plan for you

• Available expert litigation lawyers who are ready to offer their services to you should you get sued by your creditor

• Account managers who are available around the clock and are dedicated to helping you understand the program.

When you choose a company, you should feel confident that they will be by your side through every step of your journey.

Debt Settlement Can Provide You with the Relief You Need to Re-Build Your Finances

Dealing with debt can be very stressful. Looking for the best way out of it can also be equally frustrating.

Debt settlement is one of the very common strategies for dealing with debt today.

Remember, once you have got out of debt, it’s important not to make the same choices that landed you in such a situation.

Are you in debt? Are you looking for a professional way out of it? We offer expert financial solutions that will help you to get back on your feet.

To speak to a financial consultant, contact us and let us help you get rid of your debt today.

 

 

Schedule Your Free Debt Analysis

Potential clients speak with a certified debt specialist regarding their financial situation. The debt specialist evaluates the caller’s financial situation and suggests the optimal debt relief strategy.

Clients choosing to enroll in our debt relief program are then guided through the enrollment process.

Enroll into Our Debt Relief Program

Signed enrollment documents are processed and the new client receives a call from our team of dedicated account managers to welcome them to the program.

Account managers are available 24/7 and remain in active communication with clients throughout the program.

Negotiations & Settlement

Our talented negotiations team begins working on client accounts immediately.

When settlement offers are received they are first reviewed for accuracy and then presented to clients for approval. This process repeats until all client accounts have been settled.

Debts Resolved!

Your debts will be resolved in a few short years or even months so you can have a new beginning financially. 

And if you want more information about if debt relief or debt settlement is the right option for you, visit us on our website at alleviatefinancial.com.