Is debt settlement a suitable option to pay back debt?

Pamela Jace By Pamela Jace, 23rd Mar 2012 | Follow this author | RSS Feed
Posted in Wikinut>Money>Debt

Debt settlement is a suitable debt relief option to get rid of debts faster. It helps when financial situation doesn't permit to repay the debts in full.

Debt settlement - An useful option to pay back unsecured debt

Is debt settlement a suitable option to pay back debt? The answer can be yes, when you don’t have enough money to repay your outstanding balances in full. With the help of debt settlement, you can get rid of your debts by paying less than what you owe to your creditors. You can settle your debts on your own or get help from a settlement company. You can go through this article to know how you can get help of debt settlement to manage your personal financial situation.

As already mentioned, you can get help from a debt settlement company to repay your unsecured debts. In a debt settlement program, at first, a counselor, on behalf of the settlement company, analyzes your financial situation. By doing so, he/she tries to find out whether or not debt settlement will be suitable for you. The counselor asks you to stop paying your creditors; instead, he/she asks you to deposit a certain amount to the settlement company every month. The amount, which you pay to the settlement company, gets deposited in a settlement account which is created in your name. The counselor also contacts your creditors, explains your financial situation and asks them to reduce the payoff amount to some extent because you’d not be able to repay your debts in full. Once one of the creditors agrees to a reduced payoff amount, the settlement company uses the accumulated funds to repay the debt. Like this, you get rid of your unsecured debts one by one.

If you wish, you can negotiate with your creditors and settle debts, all by yourself. By doing so, you can save the amount that you otherwise need to pay to the settlement company. To negotiate with your creditors yourself, all you have to do is convince them that the only other option for you is to file a bankruptcy. Your creditors may agree to this as, if you file a bankruptcy, in most cases, they don’t get back any amount. So, it is better that they accept at least a portion of the outstanding balance. While negotiating yourself, remember to not pay anything before signing out a written agreement.

While opting for debt settlement, you should know that your credit score may get reduced to some extent since you’re not paying back your debts in full. However, debt settlement can help you get rid of your debts and help you make a fresh financial start.

Tags

Debt Free, Debt Problems, Debt Relief, Debt Settlement

Meet the author

author avatar Pamela Jace
I love to write mainly on finance related issues.

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