Debt Settlement — How it is the Best Solution


If your debts are keeping you awake at night. If you dread answering the telephone because you worry that a collection agency might be calling. If you avoid your mailbox because your kitchen table is already piled with “past-due” notices, debt settlement might be the choice for you.

For many consumers, working with debt settlement companies provides the best way for them to handle their mounting debts. These private companies work with your creditors to reduce the amount of money you owe them. The theory behind this is simple: Many of your creditors would prefer getting at least some of the money you owe them. If you have to declare bankruptcy, they may not receive any money. Debt settlement is often the best option, too, for your creditors.

Debt settlement firms help debt-ridden consumers and their creditors get to the point at which compromises are possible. The best debt settlement firms make sure that their clients pay only what they can afford. Often, this means reducing the amount of debt they owe by 25 percent or more.

Of course, debt settlements are not perfect solutions. By working with a debt settlement company, consumers will damage their credit scores. Today, that’s a serious issue. Lenders of all types, whether they’re passing out mortgage, auto or personal loans, rely heavily on three-digit credit scores to determine who gets their money and at what interest rates. Consumers with high credit scores — 720 or better — generally qualify for the best interest rates.

Working with debt settlement companies also costs money. These firms are in business to make a profit. You will have to pay them for their services.

Despite these negatives, debt settlement can bring you some much-needed relief. The key, though, is to do your research before signing up to work with any of these companies.

You should make sure to get in writing the exact fees you’ll be paying to have your debt settled. You should also get in writing a detailed explanation of how your debt settlement company plans on reducing the amount of money you owe. Be wary, too, of any debt settlement company that promises that it can reduce your debt by a specific amount. Companies are not able to predict what your creditors will require; companies who say otherwise are not telling you the truth.

You can also check the Internet for complaints about any of the debt settlement companies that you are considering. Online message boards and forums, as well as online newspaper headlines, often contain detailed information about those debt settlement companies that do business the right way and those that don’t. Don’t forget to check with your local office of the Better Business Bureau, too. This agency collects complaints made against all types of companies, including debt settlement providers. More importantly, it also provides information on how these companies resolved the complaints made about them.

Finally, avoid working with debt settlement companies that require you to pay money upfront for their services. This is often the trademark tactic of scam artists who will take your money without providing any services. The Federal Trade Commission, in fact, is banning upfront payments for debt settlement companies that sell their services over the phone. This new law takes effect Oct. 27.

Working with a debt settlement company is one way for you to erase the stress of overwhelming debt. And it’s an option that will cause you far less financial pain than will filing for bankruptcy protection. Just make sure before you sign up with any provider of debt settlement services to do your research. It’s the best way to avoid any unpleasant financial surprises in the future.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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