Debt Settlement and Other Options
Wipe our Debt (Photo credit: Images_of_Money)
There are many ways to settle debts with creditors, and one of these ways is Debt Settlement. The borrower clears off his debt through a onetime lump sum payment for an amount which is much lower than the original loan amount. Another form of debt settlement is by making reduced monthly payments to clear off a reduced amount. However, contrary to popular belief, there are different ways to settle debts without resorting to debt settlement. Go in for it only if you are absolutely sure you can bear with the costs.
Costs of Debt Settlement
Keep in mind that settlement negotiations will have to be carried out by a company specialising in debt settlements. This means you will have to look for a reliable company among the numerous scammers out there. Once you have found a good option, you will also have to pay their fees and other upfront charges which are also quite high. If you are able to bear all these charges along with your already accumulated debt, then only should you go ahead.
Debt Consolidation and Management
This is different from settling a debt. Debt Settlement means being forgiven a certain amount of your debt. However, consolidating and managing your debt means working out methods and means to pay your debt back in full. The latter is a better option if you don’t want your credit report to get damaged. Settling a debt shows up on your credit report and sends a message to future creditors that you might not be able to pay their loans off either. A debt settlement can harm your credit ratings for seven years.
Bankruptcy as an option
There is always a stigma associated with the word “bankruptcy”. People assume it to be the worst thing ever to happen to someone. However, sometimes, bankruptcy is actually a more viable option than settling debts. However, certain conditions need to be fulfilled for that.
Firstly, if you have little or no income coming in monthly, then bankruptcy is the option to go for. For debt settlement, you will need money to make the monthly payments or even the lump sum payment.
Secondly, if the amount of debt is more than the amount you earn, then even debt settlement cannot be the best option for you. In that case, file for bankruptcy.
Thirdly, if you have assets then don’t go in for bankruptcy. Because, then the court might ask for your assets to be liquidated and then you will lose whatever little you have preserved. In a Chapter 7 bankruptcy your assets will be forcefully liquidated.
Using debt relief services
Another option for debt management is through using the services of a debt relief company. All your debts including credit cards and loans are put together and a single monthly payment is calculated. You pay that amount to the company every month and there is no change. Also, you will be spared the daily harassment and heckling from your creditors because you will not be in contact with them anymore.
Before going in for any of the above options always consider the pros and the cons of these debt management services. Things like bankruptcy affect your credit score for ten years whereas debt management damages your credit for seven years. If you have money to spare and a steady income, then debt consolidation is a good option because it allows you to discharge your debts in full. If needed, you could work a little harder, do longer hours and maybe do an extra job to keep up with your payments.
About the author
John is the editor of a financial magazine and he loves to write article for http://debt-settlement-review.toptenreviews.com/. He has written many articles about Debt Settlement and other debt relief options. In his spare time, John likes to plant shrubs in his garden.
Share this:
Category: Debt
