What is debt settlement?
Simply put, debt settlement is a restructuring or reorganizing of your debt that helps you pay off what you owe more easily. It involves negotiating to settle your debt for less than the full amount you owe. A debt settlement should lower reduce your debt and make your monthly payments more affordable.
There are a variety of reasons that you may need debt relief. Often it’s due to circumstances beyond your control, such as the loss of a job, a death in the family, or a medical emergency.
Whatever the reasons for your current financial difficulties, a debt settlement can help make your situation more manageable.
Debt settlement alternatives
In addition to bankruptcy and debt settlement, there are other debt relief programs consider. These include debt consolidation, debt management plans, and balance transfers.
Debt consolidation
Debt consolidation involves combining debt from multiple sources into one loan, resulting in one easy-to-manage payment. Try to get an interest rate that is lower than the average rate of your previous debts. When done right debt consolidation loans can lower your interest payments and help you get out of debt faster. The drawback is that you may not qualify for a debt consolidation loan if your credit is in bad shape.
Balance transfer
If you have credit card debt, a balance transfer can be the fastest and cheapest way to pay it off. A balance transfer involves transferring a balance from one account to another to reduce the interest rate. It is typically a good option if you have a credit card with a high interest rate. You can potentially transfer the balance to a card with a 0% APR promotional period.
Debt management plan
Debt management plans (DMP) are typically created with the help of a credit counseling agency. The agency then presents the plan to creditors and requests lower interest rates and fees. Then, the debtor makes the payment to the agency, which pays the creditors. The plans typically last for four to five years.