Debt Settlement
Debt settlement is a process where the debt amount is reduced and is considered as the final settlement, along with the agreement of both the debtor and the creditor. This service is provided by third-party companies and then they themselves negotiate with your lender for the reduced amount. In this ongoing process, you are supposed to make your monthly payments to the debt settlement companies and not to your creditors.
If the creditors agree to the lowered settlement amount, the settlers then charge a fee from you for their work.
Advantages of Debt Settlement
Debt settlement is very beneficial when you are not able to repay your loans or when the debt price is too huge to be repaid. Below are some of the advantages of debt settlement:
- You get to pay back a lower amount of debt as the full repayment.
- Your creditors will no more be able to hound you.
- You can avoid bankruptcy by going to the debt settlers.
Disadvantages of Debt Settlement
As you avail the benefits, you get to risk a lot of things for lowering your debt. Some of the disadvantages of debt settlement are listed below:
- Your credit scores may get affected very badly.
- On not paying your debts to your creditors, you may end up paying late fees.
- After the entire process, your creditors may not agree to this settlement.
- Such services are generally very costly.
- You may have to pay some amount to the debt settlers even if your debt was not settled at all.
References:
1. Debt.org https://www.debt.org/settlement/
2. The Balance https://www.thebalance.com/the-dangers-of-debt-settlement-960622
3. Wikipedia https://en.wikipedia.org/wiki/Debt_settlement
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