You’ve probably heard advertisements that promise to settle your debts for pennies on the dollar and get you out of debt for less than what you actually owe. If you’ve been skeptical about this, you’ll be happy to find out that debt settlement is actually legal and a legitimate solution to those in debt. In fact, if you qualify for a recognized debt settlement program, the program can be the very best way to save you money, get you out of debt, and avoid a debt solution such as the consumer proposal or filing for personal bankruptcy that is more harmful to your credit.
The Basics of Debt Settlement
The basic concept of debt settlement is not difficult to understand. Essentially, you hire a debt settlement company to negotiate with your creditors on your behalf. In the process of negotiation, a good debt settlement company will be able to get your creditors to regard your debt as paid in full for less than what you actually owe. This saves you money and makes repaying your debts much easier.
After you enroll in a good debt settlement program, you will cease paying your creditors and start amassing a debt settlement fund. This builds up a lump sum that will be handed over to your creditors in the event that they approve your debt settlement. Once the settlement agreement is signed and the funds are dispersed, your debts are marked as paid.
Debt settlement is an incredible opportunity to save money. Creditors may settle with you for less than forty cents on the dollar. That can reduce a $10,000 debt to a $4,000 debt.
Debt Settlement Compared to Other Debt Relief Options
As you probably know already, debt settlement is not the only choice you have when it comes to finding debt relief in Canada. Many other options are available, so it is important to compare and contrast these debt relief programs with debt settlement.
First, there are several debt relief options that cause great harm to your credit report. Personal bankruptcy and a consumer report will remain a visible part of your credit history for roughly seven years, inhibiting greatly your ability to qualify for new loans.
Second, debt settlement is specifically designed for those who are solvent and have a reasonable expectation of getting out of debt within the normal time frame of most debt settlement programs. If you do not have a reasonable chance of saving up your lump-sum credit payment within three years or less, you may be better off with another debt solution such as debt consolidation.
Finally, debt settlement is usually a good choice if your total consumer debt exceeds $10,000. It will be more affordable for you in the long term to pursue consumer credit counselling or debt consolidation if you owe less than $10,000.
Be Sure Before You Hire a Debt Settlement Company
A debt settlement company really can help you get out of debt faster than you thought possible. If you have a large amount of consumer debt but do not want to file for bankruptcy or complete a consumer proposal, fill out the debt relief form for more details on your debt relief options.