Debt settlement lets you stop making payments to your creditors for a specific time. This can even be three or six months and it allows you to have some breathing room. Debt settlement is helpful in situations where you’ve lost your source of income and hope to get back on your feet in a few months.

How Do Debt Management Plans Work?

The other advantage of debt settlement is that it reduces your debt load. Via a debt settlement agency, you’ll negotiate with your creditors to pay a percentage of what you owe. This has advantages for you and for them.

They get back a fair sum and you can pay what you can afford. In cases where you are struggling but still want to pay what you can, this is a good option.

The cons of this situation are that you’ll have to pay fees to the settlement agency and those fees aren’t modest. You may owe taxes on any amount that is written off. There’s also no guarantee that your request for settlement will be granted, so all of your legal fees and other payments would have been made without a return.

A credit coach may warn against debt settlement because it negatively affects your credit score. It involves you not making payments on your loans and for that reason, it may be difficult for you to get credit for years.

While you may work with a third-party that represents you in negotiations with your creditors, you may also work alone and talk directly to your creditors.

By Admin