Should I choose a Debt Settlement Plan over other debt relief programs?
A Debt Settlement Plan is an appropriate debt relief option for those who cannot afford monthly payments required on a Debt Management Plan and who are looking for an alternative to bankruptcy. Debt settlement is an approach whereby the creditor and the debtor agree on a reduced balance that will be considered as payment in full and the debt is discharged. For example if you have fallen behind on your credit card repayments, a credit card company may allow you to pay 75% or even 50% of the balance and forgive the remaining debt.
To qualify for a debt settlement plan you may need to pay the settlement amount in a lump sum or pay it over a short period of time. In the past companies would never settle debts unless a debtor declared bankruptcy. However, the amount of people falling behind on repayments has dramatically increased that now companies would rather get some of the money owed back, instead of nothing.
In the UK you can hire an Arbiter or legal entity to negotiate with your creditors, however, debt settlement is something that you can do for yourself through being persistent and working with creditors directly. There are many companies who offer debt settlement and promise to cut debt in half. These charge large upfront fees and cannot guarantee results. For information on reputable companies visit http://thedebtsreliefreviews.com.
There are some consequences of debt settlement. Firstly, it will ruin your credit score. Banks will not agree to consider debt settlement unless you are significantly behind on repayments; a settled debt may appear on your report as a charge-off, which is worse for a credit score than a few months of late payments. You can usually reverse any damage done to credit by a few late payments with two or three years of timely payments, however, a charge-off can last up to seven years. This is not as bad as bankruptcy, but it will impair your credit for a long time.
So, does debt settlement work? If you’re drowning in debt, debt settlement may be able to get you out of it for less than you owe. If your credit has already been affected and you have savings or can access enough money debt settlement is a good option.
Begin by contacting your creditors. Ask them if there is any way they might be able to reduce the amount you owe if you can come up with a full payment quickly. Be persistent and negotiate!