Debunking the Myths About Debt Settlement

By admin, September 21, 2017

The debt settlement industry is growing – and it’s no surprise given that consumer debt is on the rise. However, there are a lot of myths and unsubstantiated rumours surrounding debt settlement, which we hope to debunk for you today. Let’s take a closer look at everything you need to know.

Anyone can settle

One of the biggest myths about debt settlement is that anyone can reduce the cost of their liabilities by a significant amount. It’s an excellent idea in theory, of course, but it’s far from the truth. Good debt settlement companies will only work with people who are genuinely facing financial hardships, and if you’re earning $250,000 and just don’t fancy paying the money back, your lenders will take a dim view.

It will improve your credit score

Settling a debt can still hurt your credit score, unfortunately. Once a lender reports they have accepted a settlement offer, the chances are they will make a note on your file. It’s also worth bearing in mind that it’s a new report, and will stay on your file for seven years.

It’s a cheap way out

While the sum total of your debts will be reduced in a settlement, it can still be expensive. Debt settlement companies charge you a percentage of the amount you owe or the amount you are forgiven. You also need to bear in mind that reducing your debts also means you might have to repay tax for the breaks you received for your interest payments in the past. It all adds up to a significant amount of money.

You can go it alone

Make a phone call to a lender and ask them to consider a settlement and they will tell you to join a long and growing queue. And the chances are that they will scoff at your offer. According to debtsettlement.co, using a professional company can help you make an offer that is likely to be agreed as they have a lot of leverage and expertise. The DIY route is an option – but it can often end up costing you more than you need to pay.

You need professional help

Conversely, with the right approach, it’s possible to get a good settlement deal yourself – as long as you work hard, get to know the rules, and play the game accordingly. While having an experienced negotiator by your side is advantageous, it’s not impossible to go it alone and get similar results. Ultimately, it’s all about how much time you can afford on the task at hand – and how well you can state your case.

Not settling means the debt is there forever

A final point on debt in general: as stated on consumerfinance.gov, there is a statute of limitations that can run out, meaning your debt is unenforceable in court. This vital point means that if you are being chased for an old, time-barred debt, you aren’t legally obliged to pay it back. There aren’t many advantages of doing so, either, as the settlement you pay will not be recorded on your credit card.