Our current economy isn’t exactly great. Unemployment is high; the housing market is stagnant as well as suffering a foreclosure storm. President Obama says things are improving, yet no two economists can agree on the topic. Because of all of this many Americans are finding themselves slowly being consumed by debt. Debt settlement can be extremely beneficial for people over their heads in debt, though the effects in can have can be negative as well as positive. However, pretending that the problem doesn’t exist out of embarrassment or a denial of the truth is even more harmful.
What is debt settlement? It is when negotiations are made between the lender and the borrower (or an agency on the borrower’s behalf) wherein creditors reduce the overall debt in exchange for an agreement than regular lower payments will be made. This only works with credit card debt. Auto loans, student loans, and mortgages do not qualify.
The benefits to the debtor are obvious, and there are benefits to the creditor as well. For the debtor, a huge portion of their debt is erased, usually between 40 and 50 percent. They get to avoid a bankruptcy and all the legal complications and negative ramifications that go along with it. One of the simplest effects it can have for the better is removing the daily stress of an overwhelming debt. Not having to worry how to keep up with payments, which payments to make if you can’t make them all. No more bill collectors calling several times a day, talking down to them, yelling at them, or sending threatening letter. Plus, after all is said and done they are out from under their debt and free to move forward. For the creditors, they get to collect at least part of the debt instead of just writing it off as a bad debt. Plus they are likely to get more of their money back this way that they are through a bankruptcy.
The negative effects however, do exist. The debtor’s credit rating is going to take a hit due to their payment history. Once the debt settlement process begins, the debtor in most cases ceases to make payment. This lack of payments damages your credit, and the credit report will list the debt as having been settled as opposed to paid. This usually affects your credit for 7 years or so, but it looks better than a bankruptcy.
Anyway you look at it; the benefits of debt settlement outweigh the detriments, and will go a long way towards getting the debtor out from under his debt, and back in control of his finances.
Learn about debt settlement, debt consolidation, debt relief, and more at Impact Debt Settlement