What Is Debt Settlement?
Debt Settlement (also referred to as debt negotiation, negotiated debt settlement or sometimes incorrectly called debt consolidation) means that your debt is negotiated down to a reduced amount and paid off in a lump sum. In some rare cases, multiple payments are utilized to pay off the debt, settling the account in full. Settlement is one of the most effective choices available to consumers. It’s a great choice if you have more debt than you can pay off in a 2 – 3 year time frame or are experiencing a financial hardship that has you falling behind (or just about to be) on your monthly payments. Why would creditors choose to settle debts rather than simply charge you interest and late fees over and over again? Well, it’s really a matter of dollars and good sense. Creditors know that if you get into such a bad financial position that you can’t pay your monthly payments, you may decide to declare bankruptcy or simply do nothing. In this case they may get nothing! Therefore, they are usually very willing to settle for a lower amount, given your hardship, than risk getting nothing at all, especially with a bankruptcy among the alternatives.