Debt Settlement Pros and Cons

Debt settlement can be a very effective strategypeople have already hurt their credit score by the
for paying off your credit card debt. But it is not thetime they consider debt settlement. And for many
right strategy for everyone. How do you know ifpeople, the benefits of getting out of debt can
settling your debt is right for you?outweigh the drawbacks of lowering your credit
Here are some debt settlement pros and cons toscore.
help you decide:- You must be behind in your payments (or stop
Pros:paying if you are not)
- You will pay off your debt for less than you oweDebt settlement is designed for people who are
By settling your debts you can often save betweenalready behind on their payments. So that's an
40-60%, depending on the credit card companies youindication that you're already in trouble. It is not
owe money to. Not only do you get the savings ondesigned for those feeling the crunch of high credit
the balance, but you will also save on interest. Andcard debt but can make their payments. But if you
you won't have to make the monthly payments anyare on the edge of financial disaster, you can stop
longer. So debt settlement can help you free up a lotpaying your bills, in order to the leverage you need
of money.to negotiate a settlement.
- You will get out of debt faster than paying the- You will get calls from your creditors
minimum paymentIf you are not already receiving calls from your
If you have $10000 in credit card debt and youcreditors, you will start getting them. After all, the
make the minimum payment every month, it will takecreditors want their money, and it is your
you 10 years to get out of debt. That's a long time!responsibility to pay. Never ignore these calls. If you
With debt settlement, you'll be out of debt in aroundhave hired a professional to settle your debts, they
2 years. Once you get to this point your financial lifeshould advise you to have the creditors call them. If
will improve dramatically.you are doing it yourself, take the calls and explain
- You can avoid bankruptcythe situation. In either case, be ready to get pushed
If you're considering bankrutcy, then debt settlementreal hard to pay immediately, as that is the caller's
may be an attractive alternative. Many people feeljob.
that bankruptcy is the last resort. So debt settlement- You will pay taxes on the savings
can help you get out of debt without the stigma ofAny money you save will be treated as income for
bankruptcy.tax purposes. So you'll need to pay taxes. In most
- You don't need an attorneycases this is still far less than the amount you would
You must consult with an attorney to go throughhave paid towards principal and interest, so you will
bankruptcy. You do not need the help of an attorneyprobably still end up ahead. But it is another expense
to utilize debt settlement, although many attorneysto factor in when deciding whether or not settlement
offer this as a service to their clients. You can evenis right for you.
do the entire settlement process completely on yourDebt settlement can help you get completely out of
own, although you should learn how the processdebt. Like with any financial decision, there are
works before you get started.benefits and there are drawbacks. Make sure you
Consconsider both before you make your decision. But
- It will lower your credit scorewhichever debt reduction option you choose, make
Anything you do other than paying your bills on timesure to come up with a plan, research any company
will lower your credit score. Debt settlement is noor individual you decide to work with, and then most
different. Same with paying your bills late. So manyimportantly of all, take action!