Debt Settlement: Benefits and drawbacks

The most popular solutions to the problem of heavy debt burden is to get a debt settlement or file for bankruptcy. Among these two debt settlement is preferred as it has a relatively less impact on credit report. In this article we assess the benefits and drawbacks of debt settlement.

Debt settlement is a process in which an organization will go to your lenders and negotiate with them regarding your debt. The purpose of the whole exercise is to reduce your debt burden. If a settlement company is good it can get your debt reduced by as much as 50%. This is what a creditor needs and this is the most visible benefit of debt settlement. The amount of the debt is reduced, the repayment plan is made easy and often the monthly installments are spread over a long period. This makes life a lot more easier for the borrower.

However, debt settlement is not without its drawbacks. There are two things to worry about. First, is the cost of debt settlement. Debt settlement companies will charge huge amounts for their services. The usual range is between 10-15% of the debt amount. Paying this much amount upfront can turn your financial situation from bad to worse.

The second problem caused by debt settlement is the damage done to your credit report. The very fact that you are going for a debt settlement will show negatively on your report. But, it is still better than filing for bankruptcy, which will make a bigger dent in your financial credibility.

The whole process of debt settlement becomes meaningless if you don't change your financial habits for good. With all the drawbacks, debt settlement still provides a chance to get your finances back on track and should be used for it.

Article Source: http://articlekarma.com

Duran Mueller an expert author and credit card consultant, provides great American express credit card tips. Read more credit card articles at his credit card website.

Please Rate this Article

Not yet Rated

Click the XML Icon Above to Receive Accounting Articles Via RSS!

Additional Articles From - Home | Accounting

	Print This Article
	Post Comment
	Add To Favorites
	Email to Friends
	Ezine Ready

Submit Articles
Member Login
Top Authors
Most Popular Articles
Submission Guidelines
Ezine Notifications
Article RSS Feeds
Sitemap

Bankruptcy Attorney Encino

Home
New Stuff
About Us
Site Blog
Forum
Link to Us
Contact Us
Privacy Policy
Terms of Service