What is debt settlement exactly?
Debt settlement is an agreement between the debtor and the creditor which most likely will result in a reduced balance that then needs to be paid in full. Clients that choose to use the debt settlement method are debt free in a relatively short amount of time.
Debt settlement is not the same as debt consolidation or even debt management. These options do not lower your balance but rather change the monthly payment that you have to make to the creditor. Most-likely it will be either a longer term that you have to pay that debt back.
There are a few ways that you can start your debt settlement. You can do it yourself by searching the internet and fill out websites that handle it all for you. Another way is for you to call the company itself and try and arrange an agreement with the credit department.
The best way is to hire a debt settlement company and enroll in the program that they have. The first thing that the company will have you do it to stop paying the creditor. This is to show the creditor that you really cannot pay the fees anymore and that you are in trouble with other bills that you need to pay.
In 35% to 55% of all the cases the creditor will accept the debt settlement, but will not give you a loan ever again.
There are a few downsides to all of it. Yes, you will have the debt settled at a lower amount, but there is also a drop in your credit score, that can be at the lowest 65 points and at the highest rate you credit score can drop is around the 130 points. In some cases when that happens people are unable to get loans or get in trouble with paying every day bills. When your credit score takes a big hit certain things that you would think does not affect it will. Every company that you want to sign up for will ask for your social security number these days and they do run a credit check. Trying to get a new cellphone on a 2 year contract might not be possible because the Cellphone operator will reject you because of your low credit score.
When choosing debt settlement always read and inform yourself of all the details before singing up to have you debt settled.