What are the cons of debt settlement?

Date Posted: January 7, 2023
By: Maggie Marques

What are the cons of debt settlement? Did this question cross your mind? You’ve heard of the benefits of applying for debt settlement. Imagine your creditor giving you the privilege of paying a portion of your debt and canceling the rest! You avoid filing for bankruptcy, and no credit collection agencies will call you constantly! But did you think about the possible negative implications of debt settlement?

What are the cons of debt settlement?

Like any other reality, there are two sides to every situation. To better grasp your financial choices, especially when it comes to debt settlement, it is best to know its disadvantages as well.

  • Debt settlement is not free. You need to be aware that there are fees that can range from a few hundred dollars to a couple of thousands. This will not be charged against your debt but will go to the debt settlement agency you hired to help you do this.
  • Negative impact on our credit score. It is not as big an issue as bankruptcy but settling your debt will hurt your credit score. This means that aspects of your financial life may be affected – credit availability, loan terms, and even your career opportunities.
  • Settlement is not guaranteed. Applying for a debt settlement does not automatically mean that your creditor will always agree to your conditions. Some creditors will not give the debt settlement company the time of day.

What are the other considerations when asking what the cons of debt settlement are? You will be asked to stop paying your debts while the debt settlement company is still negotiating with your debtors. Consider the implications when applying for a debt settlement; it has its good and bad points. Nothing beats paying your debts on time, but if finances are tight, debt settlement may be a solution you can consider.

 

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