Are there good alternatives to debt settlement?
When credit card debt becomes overwhelming, too many individuals trust emails and ads that claim to help out by negotiating down the total balance of money owed-also known as debt settlement.
As in most cases in life, if it sounds too good to be true, it probably is. Eliminating debt that is established in a highly regulated industry over the course of time is never as quick or easy as one would hope it to be. This is equally true of debt settlement even when advertised promotions suggest otherwise.
Here’s what you can expect for a debt settlement company:
Settlement firms collect a monthly payment from you that they set aside in a savings account while your displeased credit card companies have no choice but to charge off your accounts. This causes heavy damages to your credit history for years to come.
The settlement company will then contact all your creditors knowing at this point they are desperate enough to compromise. Though never guaranteed, let’s say a settlement is reached to pay back 50% of the original balances owed. Sounds like a good enough deal, but you are not off the hook, yet.
You will also owe up to 25% of the settlement to the debt negotiator. You may even remain legally responsible for the remaining balance, and you may receive a 1099-C form from the creditor informing you that you must pay taxes on the settlement amount. In the end, those who get the sweet deal they had expected from debt settlement are few and far between. Even when they do save money, they find themselves in an equally disadvantaged station due to an unhealthy credit score.
Rather than destroying your credit history for the next 7 years or more, most independent, financial specialists would suggest that you first contact a reputable credit counselor, such as Debt Reduction Services.
We are happy to review all your debt repayment options in full and help identify which choice is best for you. Our priority is to deliver an effective solution that is in the best interest of your long-term financial picture.
Besides providing you with strategies for eliminating your debt, credit counselors will also help you address the root cause of your financial challenges: personal budgeting, spending controls and learning how to use credit wisely.
Whether you take our information and repay your debt on your own or choose to participate in our debt management plan, our hope is that our consultation will be a turning point that sets you on a path for a lifetime of success.
Related Article: Where to Turn: Debt Settlement, Bankruptcy, or Consolidation?
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