Did you know that you can settle down your debt? No, then, here is the answer for you. Debt settlement is an agreement that is between the creditor and the borrower in which a reduced payment from the borrower is considered full payment. To know its advantages and disadvantages, you must read the entire blog.
| The Advantages Of Debt Settlement | The Disadvantages Of Debt Settlement |
|---|---|
| Debt settlement can indeed aid people in paying less | The fees that the institution or the financial agencies charge are pretty high |
| If your conventional way has not worked, you must go for this debt settlement option. | Debt settlement will indeed hurt your credit score |
| Debt settlement aids you in avoiding the debt that is being sent for collection or for “charged off.” | A renderer needs you to pay an extensive lump sum |
| Debt settlement option will help you not face lawsuits | You might still be accountable for taxes on the reduced debt |
| Debt settlement is considered the best option over filing for a bankruptcy | A few creditors might outright decline or reject to deal with debt settlement companies |
| The settlement will be charged off | Debt settlement corporations advise you to stop making payments on your debts. |
Advantages of Debt Settlement:
Debt settlement is certainly a great choice for those with a lot of debt piled up on their back, and if you are interested in a debt settlement option, then you must go through the list of advantages mentioned below.
Helps relief:
Several debt management plans are available in the market, which many financial agencies handle, but debt settlement is certainly considered the right option for you; moreover, this process is much faster than other instruments that handle the same procedure.
Debt settlement can indeed aid people in paying less on the amount that is owed hence providing you a sigh of relief.
No bankruptcy:
Did you know that you can avoid bankruptcy by opting for a debt settlement option? If your conventional way has not worked, you must use this debt settlement option. Yes, this is an exceptional option compared to other procedures and approaches.
No collection:
If you are wondering what these collections are, then here you go; debt settlement aids you in avoiding the debt that is being sent for collection or for “charged off.” Once you go for debt settlement, then it will stop all sorts of calls or collections from your creditors.
No lawsuits:
We already know what happens if the debt is not settled down before time, and going for the debt settlement option will help you not face lawsuits which means your creditors can not sue you for anything.
Well, these are the advantages of debt settlement you can achieve if you approach this option.
The disadvantages of Debt Settlement
Although debt settlement is a great choice for those who have debt piled up on their back, this option comes with an equal amount of disadvantages, and to know them, you must go through the list that is mentioned below.
High fees:
The debt settlement might sound like a great option until you are enlightened about the fee structure. The fees that the institution or the financial agencies charge are pretty high, which will be quoted somewhere around $600-$4000 or even more, and this depicts that not everyone can afford this.
Adverse impact:
Debt settlement will indeed hurt your credit score, just in case you are directly working with your creditors; yes, you heard it right. This will make a huge difference negatively in the future concerning your terms, credit availability, employment opportunities, and more.
Holding funds:
Holding funds means holding your cash, which you could use for better things. A renderer needs you to pay an extensive lump sum, which is then committed for debt repayment, while it holds in escrow for several months or even several years.
Tax implications:
If a creditor consents to settle down your debt in exchange for a reduced payment, you might still be accountable for taxes on the reduced debt. The creditor must notify the IRS if the settlement results in a debt reduction of $500 or much more.
Can be a NO:
The debt settlement company you’re paying to deal a lesser amount may not attain a contract. Debt settlement is certainly at the prudence of each creditor. A few creditors might outright decline or reject to deal with debt settlement companies. In such cases, this approach does not work for you.
Can cause more debt:
Debt settlement corporations advise you to stop paying your debts while they reconcile with creditors. That negotiation is often not a streamlined procedure and can take much time. Preventing payment on a debt means you could face late fees and accruing interest.
Well, this is the list of disadvantages that you can experience if you ever go for a debt settlement approach.
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