When seeking a solution to debt relief, you have many different options. Consumer Credit Counseling Services, debt consolidation loans, bankruptcy, and debt settlement are the most common. Of course each one has its own unique pros and cons, and each one will benefit some individuals more than others; there is no single debt solution.

Some of the disadvantages of debt settlement are:

• Unlike in declaring Bankruptcy, you have to legal protection, meaning you can be sued by a creditor for failing to make payments. If this happens while you are in a debt settlement program and you do not have enough funds in your trust account to immediately settle the debt, you may have to file for bankruptcy.

• Also, debt settlement has an unavoidable negative impact on your credit score. This is due to the fact that while in a debt settlement program, you stop paying your creditors.

Some of the advantages of debt settlement:

• Unlike in Consumer Credit Counseling or a debt consolidation loan, both of which require you to pay back your debts in full, including interest, in a debt settlement, you only pay a percentage, usually around 50% to 70% of your debt, including fees.

• Debt settlement, while negatively affecting your credit during the process, leaves no permanent scar on your credit history like filing for bankruptcy does.

• Also unlike in bankruptcy, in which your credit history is paraded about in a courtroom, debt settlement is private.

• Finally, debt settlement is a more rapid way to achieve debt relief than your other options. It can take as few as 4 months, but definitely less than 2 years. Credit counseling, and bankruptcy take 3-5 years on average to get you out of debt.

Not everyone will benefit from or even qualify for a debt settlement program, but checking with a debt settlement firm is the first step to finding answers.

Debt Settlement Debt Reduction Eliminate Debt

Before answering this questions, we need to understand what exactly a credit rating is and how it is determined.

Debt Settlement Debt Reduction Eliminate Debt

Put simply, your credit report is determined by your history of borrowing and repaying. If you pay your bills on time, and manage your debt well (meaning you don’t live beyond your means, accruing more debt than a small per cent of your income), your credit score will remain healthy. Other things, including your profession, and stability or lack thereof, also affect your credit report. When you apply for new credit, or for another type of loan, the lender or creditor checks your credit report to determine your creditworthiness, or how likely you are to pay your debt back. If your credit is good, you generally benefit from more loan opportunities, and lower interest rates.

Unfortunately, taking part in the debt settlement process will damage your credit rating. There is no way to avoid this for the simple reason that you stop paying your creditors. However, if you are having a difficult time making payments on time, your credit may already be bad. Keep in mind that other debt solutions, including Consumer Credit Counseling, and Chapter 13 Bankruptcy, also negatively affect your credit, usually more so than debt settlement because they are more prolonged. This means that it is longer before you are out of debt and on your way to restoring your credit. Also, declaring bankruptcy leaves a permanent mark on your credit record; debt settlement does not.

Upon completing the debt settlement process, you can quickly begin making efforts to restore your credit. The easiest way to do this is to pay your bills on time and limit the number of credit cards you have, and the amount that you use them. There is no quick fix for your credit score, only time and financial discipline.

The debt settlement process is a complicated one, which is why it is usually in your better interest to hire a professional to steer you through it. Once you’ve done your homework and chosen a credible and reputable debt settlement company or lawyer, what should you expect from the process?

Debt Settlement Debt Reduction Eliminate Debt

Before any of the settlement negotiations begin, the firm will perform a complete analysis of your debts. Not all debts can be included in debt negotiation. Secured debts, which are debts that are backed by collateral to reduce the risk of the loan for the lender, as well as student loans, tax debts, and a few others, typically cannot be negotiated. Debt negotiation works best with unsecured debts, meaning there is no collateral involved. Examples of unsecured debt include credit cards, lines of credit, and medical bills.

After this is completed, you have two options to begin the settlement process. You can either put a lump sum of money into a trust account to begin negotiations with creditors, or, if this is not a possibility, you can make large monthly payments – at least 4% of your total debt – into a trust account. At this point, you stop making payments directly to creditors, and only into the trust account. Once there is sufficient money in your account to settle a debt, the firm or company begins negotiations with your creditors, one at a time until they are all settled.