What Kind of Debt Is Eligible for Settlement?
You can seek a settlement for unsecured debt. That refers to debt that isn’t secured by an asset. Unsecured debt includes credit cards, personal loans, medical debt, and some private student loans.
You cannot reach a settlement for secured debt, such as vehicle loans, mortgage loans, or federal student loans. Also, you cannot settle tax debt, utility bills, or debt from lawsuits.
Benefits of Debt Settlement
There are numerous benefits that come with settling debts. Let’s go over some of the main reasons people choose this option.
Resolves Debt Faster
Debt settlement lowers the balance you owe. When you owe less money, you can pay it off faster. If you want to get out of debt quickly, debt settlement is a wise choice.
Make One Monthly Payment
You can combine all your debt together and make one low monthly payment. Normally, you will pay less than you would if you went through debt consolidation or a debt management plan. Your debt consultant will work with you, so you only pay what you can afford and nothing more.
Better Than Bankruptcy
You might consider bankruptcy if you’re in debt. However, bankruptcy often has unfavorable payment terms, and it leaves a blemish on your credit report. You can avoid both problems by choosing debt settlement instead.
No Conflict of Interest
If you choose credit counseling, the counselors might have a conflict of interest. They often work on behalf of creditors instead of you. You don’t have to worry about that when you choose debt settlement.
Debt settlement can help you build good money habits that will help you in the future. You will create a budget to use to pay your debts, and you need to stick to that budget to put the debts behind you. These new habits can carry over and help you make sound financial decisions in the future.
Drawbacks of Debt Settlement
While debt settlement has lots of benefits, there are some drawbacks to consider, as well. Consider these drawbacks before you enter a settlement agreement.
Impacts Your Credit Score
Your accounts will go past due during the debt settlement process. Otherwise, your creditors won’t negotiate and lower the amount you owe. When your accounts go past due, your accounts are impacted.
When you fall past due on your accounts, creditors will call to try to collect the money you owe. Debt Defenders can help you with this by providing you with information you can use when you answer the phone.
Possible Legal Action
When you fall behind on your debt, creditors can threaten to take legal action. This can be quite frightening. Debt Defenders can connect you with legal resources if the need arises.