How to settle debt? What are the benefits and drawbacks of debt settlement programs?

Who on earth wants to fall in the debt trap? Howsoever we manage our finance, we tend to fall in debt at sometimes of our lives. Now, like for every problem there is a solution. When you are troubled by debt issues, you better look for debt consolidation or debt settlement. Today, I will discuss certain things, which may help you regarding debt settlements.

The question how to settle debt is not as fearsome as it sounds. You need to follow certain basics before you go for debt settlement.

How can you be benefited from debt settlement? If the organization whom you contact to help you settle your debts will negotiate with your lenders. If they negotiate well, then there is a good chance for your debt to be reduced by as much as 45%-50%. Most of the lenders may not go for such program as it dents their profits. However, they will opt for it when you may file for bankruptcy, which will cause them utter loss. You need to pay a percentage of your total debt, which will be set by your creditors upon negotiation. If you negotiate a third party organization, then they will charge for this process as their fees. The fees vary from company to company. When your account is charged off, then only you can initiate a debt settlement programs.

There are some benefits of a debt settlement program. Your debt will be over in 3-4 years. Your total debt can be reduced by 40-50%. Your credit score can be improved by the subsequent payments on other bills. Bankruptcy will not be an option for you if you settle debts. Your credit report will also not be badly impacted as in the case of bankruptcy. You will also have an option for monthly payments if you negotiate with your lenders through any debt settlement company. In future, you can get credit from other lenders by showing your liability towards debts and your attitude to pay them.

Now, with advantages come disadvantages as well. So is the case with debt settlement. You will have to shell out huge fees to the debt settlement companies. Debt settlement process will also affect your credit report negatively though not as much as bankruptcy filing can do. It will take a long time to gather confidence of lenders to gain any credit in future.

Settling debts is still a better option than bankruptcy. However, mere debt settlement will not help unless you change your financial habits. You need to be more careful in future, if you go for debt settlement.