{"id":6111,"date":"2024-10-11T11:06:50","date_gmt":"2024-10-11T11:06:50","guid":{"rendered":"https:\/\/finderica.com\/what-is-debt-settlement\/"},"modified":"2024-10-11T11:06:50","modified_gmt":"2024-10-11T11:06:50","slug":"what-is-debt-settlement","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=6111","title":{"rendered":"What is Debt Settlement?"},"content":{"rendered":"\n
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Having <\/span>debt<\/span> is all too common \u2014 <\/span>77% of all households<\/span><\/a> carry some amount of debt. But even though it\u2019s common, that doesn\u2019t mean it\u2019s easy to deal with. That\u2019s why some borrowers turn to debt settlement for relief. It can potentially slim down what you owe, help you avoid bankruptcy and make debt repayment less overwhelming.<\/span><\/p>\n

But is debt settlement always the right choice? We\u2019ll explain what it is, how it works, the risks involved and other options.\u00a0<\/span><\/p>\n

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Heard of These Credit Card Debt Tips?<\/h3>\n

If you\u2019re a good credit card user, you already know how payment history, credit utilization and the length of your credit history affect your credit score.<\/p>\n

But millions of Americans overlook\u00a0these easy tips<\/a> that could help them manage credit card debt even more wisely.<\/p>\n

Read more<\/a> to boost your credit knowledge and keep your credit score in check.<\/p>\n<\/div>\n

What Is Debt Settlement?<\/span><\/h2>\n

Debt settlement is a negotiation process that aims to reduce your total debt owed to a creditor. If you and the creditor reach an agreement, you will pay a lump sum less than the full amount originally owed. In exchange, the creditor will forgive the remainder of the debt.<\/span><\/p>\n

Once the debt is settled, the creditor can\u2019t hassle you for more money. However, the process can <\/span>take several years<\/span><\/a>, and it isn\u2019t always possible to settle the debt.<\/span><\/p>\n

Keep in mind that debt settlement is only an option for unsecured debt, such as credit card debt, medical bills or personal loans. You can\u2019t settle debt acquired from a mortgage or auto loan.<\/span><\/p>\n

How a Debt Settlement Company Can Help<\/span><\/h2>\n

You can attempt to settle your own debt or hire debt settlement companies like\u00a0Freedom Debt Relief<\/a> or National Debt Relief<\/a> to do the job for you. Both companies assist people with $10,000 or more in unsecured debt and have helped hundreds of thousands of people reduce their debt. Bringing in a third party often increases the chances of successful settlement \u2014 but it comes at a cost. Companies typically charge an average of <\/span>15\u201325% of the total debt<\/span><\/a> owed. So if you owe $50,000 in debt and settle for $30,000, you will also owe the debt settlement firm a minimum of $7,500.<\/span><\/p>\n

How It Works<\/span><\/h2>\n

If you decide to tackle it yourself, you\u2019ll contact your creditors to explain your situation and offer to pay a lump sum to settle your outstanding debt. You\u2019ll probably need to talk to more than one person within a company, and it could require ongoing negotiations.\u00a0<\/span><\/p>\n

If you hire a debt settlement company, they\u2019ll handle the negotiation. The firm may have you stop paying and instead put the money into a separate <\/span>savings account<\/span>. This could negatively affect your credit score, but it also gives the company leverage to negotiate. (If the creditors think you\u2019ve completely stopped paying your debts, they may be more willing to settle.)<\/span><\/p>\n

Here\u2019s how debt settlement generally works:<\/span><\/p>\n