What is Debt Settlement Services?

Debt settlement services or debt negotiation, debt arbitration and credit settlement are services given to the client of certain offices, banks or other creditors to address the concern of their clients especially when it comes to settling their back accounts. Debt settlement service is provided by these offices to their clients who have loans in their company. This is also an approach leading to debt reduction between the creditor and the debtor once they agree that the reduced balance will be considered as the full payment.

Difference Between Settlement and Consolidation

Companies which are offering loans are sometimes willing to get paid trough debt settlement services for the reason that they are afraid of their client’s inability to pay them in the following months. In some countries, debtors are allowed to get legal help in negotiating with the creditors. Others are confused and don’t know the difference between debt settlement and debt consolidation. Debt consolidation is paid by the consumer on a monthly basis and it will be passed to the creditors, thus the creditors will receive payments every month.

On the other hand, in debt settlement, the consumer will also make a payment for each month, but the debt settlement company will get the fees for negotiation or legal work and those payments will be paid to the creditor. Dealing with these services has a danger probably on the part of the debtors. There are some people who were able to read or acquire certain knowledge with regard to debt settlement as an alternative way to provide solution to your debt or bankruptcy. These services promise to reduce one’s debt upon negotiating with your creditors. However, the upcoming result or effect on your credit is not clearly explained.

Explain Your Situation

Before going for debt settlement and considering it as the solution to your debt problems, try first to get a full and vivid story about it, how it works, what are the possible actions that the company does and other things that you should learn before making your first step. The first thing that you should do is to call your chosen company and give your creditor’s name and the amount that you owed to them. After that, explain your situation. The debt settlement services will give you an estimated amount that will allow you to reduce your debt with a lower payment that you will give each month.

Upon the advice of the company offering such services, you will now stop your payment to your creditor and you will send your payments to your debt settler. This is how it functions. The debt settlement will now start to put all your payments in a savings account and once your account reaches a bigger amount, the company will now call the creditor and begin to negotiate with them to settle the amount that you owed to them. Debt settlement service is a process of offering a one-time payment to your creditor and in return, the existing balance on the amount that you owed will be erased.

If the creditor will agree to the proposed amount that the debt settlement services presented, the settlement company will now pay the creditor and will assess fees for the settlement. Getting such services somehow does not sound bad. You will give your payments to the company that will also give your payments to the creditors. Possible problems may arise if your creditors do not want to be paid through debt settlement services. In this case, you are required to continue your payments directly to your creditor without reducing the amount that you borrowed from them.

Things to Consider about Debt Settlement Services

Those who are planning to get debt settlement services have to consider some risks such as these services often promise more than what they actually do resulting in being unable to settle and address most of your debts. Sometimes, debt settlement services are collecting extra expensive charges or fees. Most of these companies will encourage you to delay on your credit card bills and when this happens, you will be having penalties and some charges and this is the time that your creditors will collect all the payments.

Unless the company that offers such services will be able to settle all your debts, these fees and penalties will be wiped out. However, once you use their services, it will be reflected on your credit score and a negative impact will create an obstacle on your ability to get a credit card in the next few years. You should consider these following tips before getting such services.

Look for another company when they are:

Asking additional fees before settling your debts

Giving assurance to remove your debt

Telling you to cut your communication with your creditors

This Service Will Help You Settle Your Balances

If you still get their services, this company will eventually tell you to put some amount in a certain bank account and this will require a third party to manage it. This will give additional charges in using the account. This kind of process can build some risks for the consumers. One of these risks that are usually happening in some countries is that consumers are often abused by companies which are only focusing on collecting the payment from the debtor without taking any steps in settling the amount owed by the person and leaving the consumer with an unsettled debt to the creditor.

For those are regularly giving their payments to their creditors, debt settlement services are not an option for them, but for those who can give their payments regularly for the given time, this process will help them settle their balances and eventually remove their stress on how they can pay their balances in the following months. However, you should consider that the allotted amount which will be given to debt settlement services must really reach the creditors to decrease your burden and to avoid further problems related to your balance and financial matters. In other words, make sure that the company you will get is trustworthy and will really help you get out of your debts.