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Debt settlement is the practice in which the creditor agrees to minimize the outstanding debt balances by 40% to 60% so that the debtor can shell out a lower amount than s/he is actually supposed to pay. Debt negotiation services are offered for those who have experience in financial or personal hardships through health difficulties, job loss, divorce and/or other tragedies that make it impossible to repay the loan. When creditors are struggling with debt and looking for profession help, they have four options: credit counseling, debt negotiation, debt management, or debt consolidation. The most popular solutions to the problem of heavy debt burden are to get a debt settlement or file for bankruptcy. Among these two options debt settlement is preferred as it has a relatively less impact on credit report. If a settlement company is good it can get your debt reduced by as much as 50%. This is what a creditor needs and this is the most visible benefit of debt settlement. The amount of the debt is reduced, the repayment plan is made easy and often the monthly installments are spread over a long period. This makes life a lot easier for the borrower. But debt settlement is not without its drawbacks. There are two things to worry about. First, what is the cost of debt settlement? Before going for a debt settlement service company, debtor must compare the cost of debt settlement with the benefit that s/he gets from the service. Debt settlement companies will charge huge amounts for their services. The usual range is between 10-15% of the debt amount. Paying this much amount upfront can turn the debtors financial situation from bad to worse.