The Pros and Cons of Debt Settlement
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.
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