4 Reasons to Consider Debt Settlement
When you are facing large amounts of debt, the options can seem overwhelming. Many debt solutions can help people, but not all of them are right for everyone. So what makes debt settlement a good option for you? By choosing debt settlement, people can avoid bankruptcy, repay the debt in less time, and find relief from overwhelming debts.
What Is Debt Settlement?
Debt settlement is the process of negotiating with creditors to pay off a debt for less than what is owed. Generally, this is used for people who have multiple credit card accounts in default or large unsecured debts and want a more reasonable repayment plan than debt consolidation. You can either try to negotiate yourself or via a representative. This process is different than credit counseling, which is using an organization (usually a non-profit) to advise you on managing your debt. However, a credit counselor may recommend debt settlement as a solution.
#1. You Want to Avoid Bankruptcy
Bankruptcy is one of the biggest reasons to look into debt settlement. Because bankruptcy stays on your credit report for 10 years, many people rightfully want to avoid having to file. Even after the 10 years have passed, many financial situations — including applying for loans or credit cards — will require you to disclose whether or not you have ever filed. In contrast, debt settlement only stays on your credit report for seven years and does not have the same long-term consequences as filing for bankruptcy.
#2. You Need Some Relief
By using debt settlement, you can negotiate a payment plan that works with your income. This is a great way to gain some relief when it comes to your large debts. Creditors don’t want you to file bankruptcy either, as it may result in them getting less than what they would by settling. They might even end up with nothing at all. Because of this, debt settlement can be an attractive option to creditors. And when done properly, it can make your payments more manageable.
#3. You Want to Reduce Your Repayment Timeframe
In addition to making payments more manageable, debt settlement usually cuts down the repayment timeframe to only two to four years. This is the shortest amount of time for most repayment plans and is shorter than credit counseling or debt consolidation, which usually are set at three to five years.
#4. You Have an Abundance of Unsecured Loans
Unsecured debt is the easiest kind of debt to negotiate a settlement for. Secured debt uses collateral, meaning that they would rather collect the collateral than agree to a settlement. Because you don’t have to put up collateral when getting an unsecured loan, there is more risk to the lender, making it easier to negotiate a settlement as long as you stay firm and informed in negotiations.
While all debt solutions have their drawbacks, each can be the right fit for certain types of debt issues. When you are looking for a way to quickly pay off an unsecured debt on your terms without filing bankruptcy, debt settlement could be right for you. Consider consulting with a professional to find the best solution for your needs and achieve a better outcome.