HOW DOES DEBT SETTLEMENTS WORKS? IS IT WORTH IT?

An Overview of Debt Settlement

Debt settlement is a kind of agreement where your creditors accept an amount less than what you owe. In simple words, they will not harass you for the money after you have settled down for an amount. Many people consider debt settlement as one of the best solutions to become free from debt. But debt settlement can sometimes be a risky option.

In some cases, it affects your credit score negatively, such as the creditor might not agree to debt settlement or might take a long time for accomplishment.

How does it work?

Debt settlement comes into the picture when you miss your due payments or any heavy EMI amount that has been left unpaid. It is an intimidating task to make creditors agree on debt settlement until there is some good reason to believe.

Here, a debt settlement company helps negotiate with creditors to reduce the amount you owe, primarily on indiscreet loans. But you should know that debt settlement is always limited to some of the debts, and it can’t be acquired on safe loans such as a home loan.

For people struggling to pay debts on your unsafe loan, debt settlement is always a dependable way for settling down. In India, debt settlement works when you cannot pay at all, which implies you have no money left for repaying all your debts.

But in a debt relief program, you should have some cash for making payments through debt settlement. When the debt settlement company trusts that you have enough to make a heavy offer, it starts negotiating with the creditor to accept a small amount.

 Also read:  4 Proven ways that can help build your credit score fast.

Risks involved with Debt Settlement

Selecting the right debt settlement company is essential before settling down your debt with the creditors. If the company does not offer a certified legal process and is not affiliated with any bank for settlement, then the company is undoubtedly a fraud. Debt settlement is not as straightforward as it sounds to be, and it is the ultimate resort for resolving all your debts.

Here are some of the risks that are linked with debt settlement:

Your credit takes a hit:

  • If you are a person whose account is felonious, you will be in default while diverting your payments towards any settlement. A debt settlement can affect your credit score and your credit reports negatively. When your account shows a lousy credit score, it will be difficult for you to apply for a new loan. Your loan application might not be accepted, and you will be considered a non-payer.
  • Your penalties and interest get accumulated: You might get charged with a high-interest rate if you have chosen debt settlement with lenders. Your interest consistently rises on your debt amount.
  • You have to make a payment after your debt settles down: A large number of companies charge a large number of fees for paying down your debts with your creditors and might even be subject to fraud and scams. Based on your debt balance, you can settle down with a debt settlement company where the legal team will negotiate with the creditors, and after your debt is settled, you have to pay your fees.
  • You might have to pay extra fees: Other than the basic fees that you will pay for the debt settlement, consumers can also face some of the other costs like setting up and additional monthly fees for maintaining a debt settlement under the program.
  • Irrespective of all the risks involved with the debt settlement option, if you decide to go with that option, look for the best debt settlement company in India. Here are a few things you need to keep in mind while searching for a good debt Settlement Company:- Go through the company reviews to know if they are trustworthy or not.
    – Keep yourself away from the company that asks for money in advance without giving any settlement letter from the creditors.
    – Ensure the fees you will pay are planned as a debt percentage eliminated instead of the debit balance at enrollment.

So, in this way, you can opt for debt settlement with your creditors.

The Bottom line

If you wish to go ahead with the debt settlement even after knowing all the risks stated above, it is important that you choose the best and most relevant debt settlement company in India.

Before you sign for a debt settlement program with any debt settlement company, here are some of the things that you need to keep in mind:

  • Opt for the company that has earned excellent business ratings and customer reviews.
  • Ensure that the company does not charge any upfront fees.
  • Check with the company background including the company’s experience.
  • Find the best debt settlement company that is supportive and hassle-free services.

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