The Truth Behind Debt Settlement

Debt settlement is a program that is set up to meet an individual’s financial needs that helps aid them in reducing their debt and paying it off in a timely matter. This process is done through a debt settlement company that negotiates with the individuals creditors on their behalf to assist them in lowering their balance. Once the settlement is finalized they then assist them in setting up a monthly payment plan that fits their budget.

Like many other financial programs there are pros and cons to using a debt settlement program. Pros to this program are that it helps prevent bankruptcy which in return does not affect ones credit score. It stops individuals from receiving harassing and threatening calls from collections agencies who plan to take legal action. It also negotiates on an individual’s behalf to help them reduce their overall debt amount which in return lowers interest and fees from outstanding balances. These are great benefits to an individual because the company works for their behalf to meet their needs in a way that helps both the individual and creditor.

As stated above there is also some cons to using a debt settlement program to help you receive financial assistance in reducing your debt. Cons to using this program are that when a portion of the balance is waived it is shown as an income and requires one to file it on taxes. It also requires you to make every payment or it has the potential to void the settlement offer. Another disadvantage is that due to their being no legal standing with this program the creditors can still initiate legal action against an individual at any time. Hopefully a creditor would not do this and would stick to their settlement but it is a risk that an individual needs to be aware of when making this type of commitment.

Overall, debt settlement is a program used for individuals who are in debt and are trying to reduce the amount they pay. It is beneficial because it avoids an individual from needing to use other alternatives like bankruptcy. It also provides and teaches individuals methods like budgeting skills, and how to make their monthly payments in a cost effective and efficient way. The most important factor to consider is to ensure you research the settlement company before you go with them to ensure you understand the process of debt settlement to reduce your risks and increase the advantages of becoming debt free.