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6 Benefits and 4 drawbacks of debt settlement

There are various benefits and drawbacks of debt settlement program. It is essential that the debtors know the benefits and drawbacks of a debt settlement program so that they can take the full advantage of it.

Benefits of debt settlement

 The six benefits of debt settlement are given below:

   1. Debt relief: You can get rid of debt within 24 to 36 months and can start building your credit again.

   2. Reduction in overall payment: Debt settlement helps to reduce the overall payment by 50% to 60%.

Debt Consolidation Care

   3. Relief from creditors: When you have enrolled into a debt settlement program, the creditors stop making collection calls to you. You can live peacefully.

   4. Avoid bankruptcy: Debt debt settlement allows you to avoid bankruptcy. You should avoid bankruptcy because it lowers your credit score. It will be very difficult to get any kinds of loans later.

  5. Easy process: Debt settlement is an easy process. You can handle it on your own also provided you have a sound knowledge of it. You don't need to hire an attorney.

  6. Late fees: It also helps you to skip late fees, penalties, etc. It also helps to reduce the interest rate of the loans.

Drawbacks of debt settlement

 The four drawbacks of debt settlement are given below:

   1. Negative marks in the credit report: Your debts are settled only when you have saved half of the outstanding balance. This means that the creditors are not getting any payment till that time. This makes a negative impact on the credit report.

   2. Fees: Debt settlement companies charge an upfront fee on top of a monthly fee. Also, they charge a fee on the percentage of the debt forgiven.

   3. Pay tax: You have to pay tax for the amount of debt forgiven by the creditors. This is because the forgiven debt is regarded as taxable income by the government.

   4. Scams: There are many fraud debt settlement companies that lure debtors by making big promises. Thereby the debtors loose both time and money which they cannot afford to loose.

 Like any other debt relief programs, debt settlement has benefits and drawbacks of which the debtors should have an idea.

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