People run up debt for a lot of reasons. Medical bills can pile up after a lengthy medical procedure that your health insurance did not totally cover, or a credit card may have been used to pay for a major roofing repair. Debt can sometimes get out of control for consumers, and they need options.
When you are facing the possibility of bankruptcy due to overwhelming debt, it is time for you to learn the pros and cons of debt settlement. There are several different types of debt relief programs available for consumers to choose from. But when all of the options are compared side by side, the best choice for debt relief may be debt settlement.
Your Credit Score – The Bad News
The one most notable drawback to debt settlement is that it can have a negative effect on your credit score for a short while. Negotiating payoff amounts with your creditors creates hits to your credit score that can cause it to drop by a noticeable margin. The only way a credit card bank will negotiate with you is if you are behind on your bills. When you miss 6 payments in a row, they will be very willing to negotiate down your debt at a cost of your credit score.
Your Credit Score – The Good News
Because debt settlement lowers your overall debt obligation, it improves your debt to income ratio. This means that you are using less of your income to pay for your debts and have more spare cash on hand. This has a significant positive effect on your credit score that offsets the initial negative effect of debt settlement. You will have more cash in your bank account each month because you do not have to send $100s and possibly $1000s each month to pay your Visa and MasterCard bills.
Potentially High Costs
Debt settlement is like any other professional service in that it costs you a fee. If you do not do your research, then you may wind up doing business with a debt relief organization that charges high upfront costs and will also charge you a regular maintenance fee throughout the course of your program. Avoid companies that want to charge an upfront fee before they do any negotiating.
Potentially Low Costs
There are debt settlement organizations that do not charge upfront fees and only get paid when the company delivers a debt relief program that fits your budget. When you work with the right organization, you will find that debt settlement is one of the least expensive options available. Especially compared to the long term costs of bankruptcy.
When you compare the pros and cons of debt settlement, one of the popular programs you can compare it to is debt consolidation. A debt consolidation loan can last for a term of anywhere from seven to 10 years. A debt settlement program reduces your debt to the point where you will be able to pay off your debt in two to four years. Plus you can save up to 50% off of your unsecured debts.
Settlement Attacks Your Debt
One of the biggest pros with debt settlement is the way it helps you reduce your debt. Consolidating debt with a loan is the process of moving your balances from several accounts to one account. Instead of addressing the debt itself, you are just moving it around.
A debt negotiation professional will work with your creditors to lower your debt by as much as 50 percent by negotiating lower payoff amounts and then creating a monthly payment plan. This process attacks your debt directly and lowers your monthly obligations. So you can get out of debt faster and move on with your life.
Protects Your Financial Future
One of the solutions that consumers consider when they are in debt trouble is bankruptcy. A bankruptcy will stay on your credit profile for up to 10 years and be a red flag to potential employers and apartment landlords. A bankruptcy could cost you a future job and a place to live.
Debt settlement does not present the same issues that bankruptcy causes during a credit check. Your ability to quickly improve your credit profile after starting a debt settlement program will help you to stay in the running for the job and the apartment that you want.
We are a professional debt settlement organization that has help many consumers avoid bankruptcy and get their personal financial obligations under control. Call us today and let us do a comprehensive overview of your financial situation and put you into a program that is going to save you money, lower your debt and allow you to get your financial world back under control.