Because the impact on your credit score and final cost for debt relief can vary tremendously from debt solution to debt solution, the one that gets you out of debt the fastest is not necessarily the best option.

When working your way out of debt, your goals will be a balance of priorities with regards to:

  • How long it takes to get out of debt
  • How much it costs you (interest, fees, penalties)
  • Your credit once you’re finally debt free

Considering these points, the amount of time you spend in debt settlement may be less important if you prioritize saving money or being able to borrow in the near future.

Are There Debt Solutions That Get You Out of Debt Faster than Debt Settlement?

A debt settlement program is not usually the fastest way to get out of debt. That “honor” belongs to personal bankruptcy, which allows many first-time filers to be debt free within nine months. However, if we look a little deeper, getting out of debt in nine months is not always the best option. In bankruptcy, you always surrender assets such as personal property, cars and even your home. You might get out of debt in nine months, but you will be left with whatever bankruptcy exemptions your province or territory allows. Essentially you’ll have to rebuild your life from the ground up.

Debt settlement will probably take longer than nine months, but if you fulfill the terms of the agreement, you will not lose your assets along the way, leaving you further ahead than someone who chose bankruptcy for speed.

How Long Does Debt Settlement Take?

There is no set time frame for debt settlement that applies to every individual. Typical participants get out of debt within one to three years, but the amount of debt you are carrying and the amount you can afford to pay each month are the final determining factors in how long it takes you to get out of debt.

Comparing Debt Settlement to Other Programs

The best way to figure out whether you are better off with debt settlement or another program such as credit counselling or debt consolidation is to compare the total cost of each program.

As an example, let’s consider a man who is $30,000 in debt, and is currently paying an interest rate of 20 percent. If the debt is amortized over ten years, the man will pay a total of $69,572.04 over the course of the loan if he only makes the minimum payment each month. That represents an interest charge of $39,572.04.

The man wants to save money, and he chooses a debt consolidation loan that reduces the total interest rate to 15 percent and amortizes the principal over 3 years. At the end of the term, the borrower will have spent a total of $37,438.55 to pay off his debt, which includes total interest payments of $7,438.55

Suppose a consumer credit counselling agency is able to negotiate a debt interest reduction of 4 percent and amortize the debt over two years. In that case, the total paid back will be $31,265.94 The total interest is $1,265.94. However, the borrower still pays back $30,000 in principal, just as he does in the debt consolidation example.

Now let’s assume that an agency is able to negotiate with the man’s creditors to settle the debt for $15,000 over three years but with no interest rate reduction. At the original 20 percent interest rate, the debtor pays a total of $20,068.34 to pay the debt in full, which includes $5,068.34 in interest fees. If, on the other hand, the payment is made in a lump sum, the debtor pays only the principal total of $15,000.

The total savings are clearly far more considerable under debt settlement than the other options, as seen in the following chart:

Debt Program Original Principal Interest Rate Length of Term in Years Total Interest Total Paid on Loan Percentage Saved from Original Loan Terms
Original Loan $30,000 20% 10 $39,572.04 $69,572.04 N/A
Consolidation $30,000 15% 3 $7,438.55 $37,438.55 46.2%
Counselling $30,000 4% 2 $1,265.94 $31,265.94 55.1%
Settlement (w/ interest) $15,000 20% 3 $5,068.34 $20,068.34 71.2%
Settlement (no interest) $15,000 N/A N/A $0.00 $15,000 78.5%


Is Debt Settlement Right For Me?

Clearly, a debt settlement program saves you the most money on your debt even if it takes longer to complete than other debt relief options, but that doesn’t mean it’s the best option. Fill out the debt relief form for a custom debt relief consultation and figure out what’s best for you.


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