Is debt settlement good or bad?

Sandy Thomson — Wed, 07 Apr 2010 18:48:14 +0000

When debt becomes overwhelming, the idea of debt settlement might occur to one quite naturally. Settlement helps one in reducing his debt burden by significantly lowering the debt amount. However, there are certain pros and cons attached to it, too.

Pros of debt settlement

Alternative to bankruptcy: Debt settlement is particularly appealing to people who are at the verge of filing bankruptcy to avoid their debt liability.
Reduces debt amount: It can help you in satisfying your debt for far less than what you have owed originally. You may successfully save between 50 percent and 60 percent on each account.
Become debt free: You can free yourself from your debt obligation within a period of 24 to 36 months.
Help in rebuilding credit: Once you successfully settle your account, you can start rebuilding your credit.
Settle all unsecured bills: You can settle all your unsecured bills through settlement.
No further liability: Once the debt is settled, the debtor is free from all future liability of making payments toward it.
Help you save: Because you can lower the debt amount, you can save money through settlement.

Cons of the process

Debt settlement isn’t free from negatives, and debtors contemplating settlement should be aware of its cons in order to make an informed decision.

Put a dent on your report: The process of settlement is likely to put a dent on your credit report because you can’t negotiate a settlement with the creditor until you default on the account.
Negative marks would continue: Even if you have settled the account, the negative marks would continue on your credit report.
Limitation to unsecured loans: Settlement doesn’t work for secured loans. Hence, you can’t settle your mortgage or auto loan. Also, settlement isn’t an option for student loans.
Incur tax liability: Though settlement would reduce your debt burden, you may incur tax liability on the forgiven amount of debt.

Whether you should consider settlement depends upon your situation. If your debt situation has become extremely unwieldy so that you can no longer manage it, debt settlement can possibly be your solution.

Get rid of your unsecured debts by consolidation

Sandy Thomson — Mon, 01 Mar 2010 20:11:06 +0000

Are your bills looking like this? Debt consolidation might be for you!

If you are finding it difficult to manage multiple bill payments on time, you may consider consolidating your bills. You can enroll in a bill consolidation program offered by the various debt relief/consolidation companies or apply for a debt consolidation loan. Before enrolling in the program, you must gather sufficient knowledge about the way it works.

What is a debt consolidation program?

A debt consolidation program helps you consolidate all your unsecured bills including your medical bills, student loans, utility loans, store cards and unsecured credit card bills. You can replace all your higher interest bills with a single bill at low interest by enrolling in a consolidation program.

How does debt consolidation program work?

A debt consolidation program helps you tackle your debts and pay your creditors on time. It works in the following way:

Assess your financial situation: A representative of the consolidation company analyzes or assesses your financial situation.
Negotiate with creditors: The company representative communicates with your creditors on your behalf and negotiates with them to reduce the rate of interest on your bills. The company may also help you waive off late fees. The consolidation company designs a repayment plan for you based on your credit needs and gets it approved from your creditors.
Single payment to the consolidation company: As soon as your creditors approve the repayment plan, you have to start paying a single lower monthly payment to the consolidation company and they will disburse the payment on time among all your creditors.