A debt settlement is a debt relief alternative, that sounds great on paper but in reality is full of half-truths and misleading information. A debt settlement company will claim to settle your debt for pennies on the dollar, supposedly settling your debt for half of what you own. If it sounds too good to be true, then unfortunately it is. It is important to know how a debt settlement functions and how it will a
The Down Falls
OF DEBT SETTLEMENT
- Negatively impact your credit score for years
- Late fees are accumulated increasing your overall debt, sometimes by $1000s
- Additional tax implications.
- High service fees
- No financial education or support
- Continued harassing calls from creditors demanding payment
- Some credits can refuse a settlement and is within their rights to sue for full payment
- High cancelation fees
In the News
The Consumer Financial Protection Bureau files lawsuit against the nation’s largest debt settlement service provider, Freedom Debt Relief.
Read about Debt Settlement’s deceptive practices here with the official report
Debt Settlement vs Debt Management
To compare two very popular debt relief program, click on the tabs to find out debt managemenet and debt settlment are similar and how they are different.
Provides on-going financial education and support
One low monthly payment, based on a personalized financial budget. Payment is distributed among your creditors.
Interest Rates & Fees
Negotiate with creditors to lock in lower interest rates & fees.
No penalty to cancel, but you will still owe your creditors the remaining balance at your original interest rate
Assistance through debt management programs should not hurt your credit score.
Small regulated state fee.
Stop collection calls.
Each payment is distributed to your creditors every month.
Stop all credit payments. Make deposits into a savings account through the debt settlement company for up to 3 years until debts are settled.
Interest Rates & Fees
No change in your interest rate. Late fees will accumulate and be added to your debt.
Usually, a large penalty to cancel the program. Will be responsible to pay remaining balance plus all additional late fees.
Accounts that are past due and settled for the less amount will have a large negative impact on your credit score.
Fees could be as high as 20% of the debt that is settled. Ex: $10,000 debt = $2000 fee
Collection calls will continue to harass you.
Creditors could file a lawsuit against you if they are not receiving payment.
A Debt Settlement Alternative
Credit counseling is a free service that can help anyone looking for debt relief or bankruptcy alternatives. If you are struggling with debt, and are looking for a way out, without sacrificing your credit.
Give one of our credit counselors a call at 888-960-5774
or start your credit counseling online.
Struggling with your debt? We can help!
Talk to a debt counselor today and take control of your debt. Call for a free financial assessment with a certified credit counselor and receive a customized budget and a no-obligation debt relief quote.
For more information visit our FAQs