Debt settlement has helped hundreds of thousands of people become financially free. IT’s a practice that allows you to pay an amount of money back that is smaller than the amount you actually owe. A lot of banks and private lenders practice debt settlement to get people to pay them back even if they don’t have a possibility to cover the whole sum.
With a team of professionals you can find on this website, debtquest.com, almost any debt will be settled on terms beneficial both for you and the lender.
For the bank or private company, it’s a chance to return at least a part of the money the payee owes, and for the one in debt, it’s a chance to get out of this cage. And it does feel like a cage at times.
So, why is debt settlement a good thing and do you need it?
Is Debt Settlement Any Good?
Debt settlement is good if it’s successful. There are lots of criteria for that, but here are some of them in brief:
- You finish having to pay an amount smaller than your initial debt;
- The company that helps you doesn’t charge a fortune for their services;
- You’re given an opportunity to save the money during the negotiation;
- You hire a team of experts to contact your lender.
The initial purpose of debt settlement is to negotiate a smaller sum to return to your bank or private lender. It’s not always successful, but oftentimes you can get a really good deal. That is if you don’t have to pay a fee larger than the amount of money saved by the settlement. Approach the choice of consultants and negotiators carefully and choose a balance between effectiveness and price.
A lot of companies allow you to save money while they are negotiating and stop paying anything to the lender until the final settlement decision. During this time, you can save enough for the lump payment.
In any case, you will have to pay the loan back to improve your credit score and become more independent financially. Avoiding contact with your lender because things got rough and you have not enough money to pay back isn’t wise because the situation may deteriorate. Always choose professional help and make sure the result is worth it.
Debt Settlement RIsks
The purpose of this article is not to represent debt settlement as the perfect solution for everyone. We only want to inform our readers about all the aspects of debt settlement important for your future. Logically, there are certain risks you will need to be ready for. That might be one of the reasons why you should hire professionals when deciding on this move. Thanks to their experience, the entire process will surely be less risky for you. So, let’s see together the biggest risks of debt settlement.
Using Personal Credit Cards Won’t Be Possible
Believe it or not, you won’t have the chance to your credit cards. That is an agreement you will have to make when using credit card settlement services. It might be tough to get used to that rule. However, it is better to know about it before the entire process start. You will need to find another way to purchase things.
Unfortunately, Credit Score Goes Down
A positive credit score is important because of different reasons. That especially counts when we talk about entrepreneurs. They usually need to get a bank loan when unexpected costs arise. However, when you participate in the debt settlement services program, your credit score will probably go down.
At first glance, something like that will also be tough in the beginning. Because of that, it would be in your best interest to complete the program as soon as possible. After you do that, your credit score will soon go up. At least, it is not something you will have to wait for a longer period.
Collection Calls Won’t Stop
Here comes the part when collaborating debt settlement service companies becomes even more important. Many people believe that the so-called collection calls stop when they enter the program. Unfortunately, something like that may not happen. Because of that, you must talk with your clients and see how to handle those calls. In most cases, most professional companies will find a solution to that problem.
Taxes on Debt Forgiveness
We don’t want to say that something like this happens all the time. Yet, we need to mention that some people may owe taxes on debt forgiveness. Every financial institution needs to report canceled debts that have a value of over $600. More precisely, they need to notify the IRS. In some cases, the debtor needs to report that on their income tax return. Because of that, it might happen that you will have some additional costs. Logically, most people do not think about them and they remain unprepared when those expenses arise.
Applying for a New Credit
This risk might seem obvious at first glance. However, we need to mention it because some people forget about that. You will have to forget about applying for new credit until the entire process end. After you “get out” of the debt settlement program, you will manage to apply for new credits if that is necessary. In other words, patience will always pay off in the end and you won’t have to worry about the future a lot.
The Decision Is Yours
See for yourself if debt settlement is a good thing and if it will work for you. The process is difficult and requires a lot of patience, but it’s better to start early. You can contact the lender yourself, but only if you can persuade anybody. It’s always good to come clean and ask for help, and most lenders are loyal enough they will settle for beneficial terms.
But it’s recommended to find a company that can help you by negotiating the best terms and have you pay a smaller sum, including their fee.