What is Debt Settlement
Debt settlement is negotiating a settlement of the debt with each creditor instead of filing bankruptcy. The amount settled can often be much less than the balance owed or claimed to be owed. However, going down this route may require you to hire an attorney, which can get tricky quickly. Through a debt settlement process, you (or, ideally, a professional firm) negotiate with creditors to settle a debt for less than what is owed. This method is most commonly used to settle a large debt with a single creditor but can be applied to multiple creditors.
The benefit of debt settlement is that you will be paying less than what you initially owed. However, it is a risky and non-guaranteed way to approach your debt. To be successful at it, you have to come up with considerable negotiation skills with lenders. Debt settlement can negatively impact your credit score, as well as drag on for up to 36 months before you see results. However, getting out of debt is also important to start increasing your score and achieving a healthy financial status.
Debt settlement only works for debts without collateral. It can be used in the case of unsecured credit card loans and consumer accounts. As a recommendation, pursue it when you are currently behind on payments and your credit rating is low.
Popular Companies to Help You to Settle Unsecured Debts
Freedom Debt Relief
Learn how Freedom Debt Relief, the biggest debt negotiator in the US, can help you settle unsecured debts like credit cards.
Freedom Debt Relief is the largest debt settlement company in the U.S. They have helped over 800,000 consumers to resolve over $10 billion in debt since its foundation in 2002.
The Freedom Debt Relief Program is an affordable solution to help minimize your debt load. A dedicated team member works with your creditors to negotiate a settlement offer that helps you get rid of debt without blowing up your budget. The program covers credit card debt, department store credit debt, medical debt, and personal loan debt. Free consultations are available, and their experts will negotiate with your creditors to reduce your debts.
Accredited Debt Relief
Learn how Accredited Debt Relief can help you cut your monthly payments in half to pay off debts by enrolling in their debt relief program.
Accredited Debt Relief offers solutions to people who are struggling with debt. After a free consultation, they will help you determine the best course of action for you to pay off your debt. As part of the Accredited Debt Relief Program, their debt consultants will negotiate with your creditors to settle your debt for less of what you owe.
Enrolling the program can be an alternative to filing for bankruptcy and completing it will be mean an easier financial future for you when you have paid all your enrolled debts.
How to Choose a Debt Relief Company
It’s important to be responsible when looking for companies, so always look for—at a minimum—an accreditation from the AFCC and the IAPDA. Hence, you know you are handing your money over to someone legitimate. A reputable company will offer you dedicated human support throughout the process, charge only a reasonable fee, and give you options to help tailor your program to terms that make sense.
According to the FTC, debt settlement companies must be transparent with you and tell you how long and how much money you need before you can settle. Settlement companies must also disclose “the possible consequences if the customer fails to make timely payments to the creditors”. They cannot force a creditor to accept a settlement offer. Arguably, the most important thing to look out for is whether the company guarantees to settle with all of your creditors.
We’d recommend you choose a transparent and open company with you about their processes and the outcomes.