Debt settlement: what is it?

Debt settlement. Almost everybody is in debt. But if the money you owe goes to the hundreds of thousands and if this is a financial responsibility that you are having a hard time fulfilling, then applying for a debt settlement is an option you can avail yourself of.

What is a settlement of debt?

Debt settlement is a recourse that you can take to wipe clear your debts. It is talking to your lender and negotiating for less than you owe. Yes, your debts will be wiped clean after you pay the negotiated amount, and you will have no financial obligation, but your credit score may be affected.

How does debt settlement work?

Usually, you will need a third party to apply for a settlement. They are also called debt relief companies. The third party can be a person, like your lawyer or a company, who will talk to your lender and negotiate the terms for you. As this third person comes into play, it is a must to pay for his services. You need to consider one aspect of debt relief because it comes with a hefty fee. Costs vary from 15-25% of the amount you originally owe and not on the settled amount.

Debt adjustment takes time. It will not happen instantly; it will take months and even years for the company to talk to your creditors and try to devise a beneficial compromise for your benefit. The time factor is one of the reasons why hiring somebody to do this for you comes with a hefty price.

Remember that unscrupulous debt settlement companies will not tell you the truth and promise instant success without hard work. If it is too good to be true, it must be. So deal only with legit companies who will not demand money before they start working on your case.