Debt Settlement: What You Need To Know
For a person who is knee deep in debt, debt settlement appears to be an attractive option for keeping yourself afloat. Newcityfinancial.com, however, warns that not everyone who has a trashed credit score is unable to make payments or lacks income for upkeep is suitable for debts settlement. There are risks involved in this process, and since it won’t stop collection notices, late fees or threats from your debtors, it could just extend your financial woes.
Debt Settlement Secrets No One Tells You
Debt settlement will first confuse you with debt consolidation since most debt settlement companies will tell you to make payments directly to the company instead of making payments on your bills. But there is a big difference between debt consolidation and debt settlement.
In debt consolidation, you are given a loan to pay off all your debts cumulatively so that you’re only left with one loan mostly a lower interest rate. The debt consolidation lender or company becomes your new debtor and is the only person you make single monthly payments to until you have cleared off your debt. This reduces the headache of multiple debtors being on your neck.
On the other hand, debt settlement leaves the company in full control of how your debts will be paid off. The debt settlement company will try negotiating a settlement with your debtors on your behalf and stop you from making payments in the meantime making your accounts delinquent.
Is Debt Settlement Ideal For You?
What you need to understand is that while you are making payments to the debt settlement company and they are charging you fees for it, the money they’re stock-piling is not being paid to your debtors. This means angry debtors will still be jamming your phone and credit card companies will still stressing you for your overdue bills until 180 days when they can write off and trade it to a collection agency at a fraction of its real value.