Debt settlement seems to be a favorable debt relief solution when you are simply unable to repay your existent debts in full. Some people suggest the debt consolidation solution here, but that would mean taking a new loan again and that too of equivalent amount. When you are unable to pay the debts, the best way is to reduce it to a reasonable limit which is assured by a debt settlement negotiation. However, it’s important to mention here that there are many myths surrounding debt settlement programs which should be busted immediately.
The post here offers a brief on the most popular debt settlement myths.
One can settle his debt himself always
You should understand that the whole concept of debt settlement is based on how well one can negotiate out a reasonably reduced debt limit. The creditors are obviously not willing to let go of their agreed money and hence,an excellent negotiation power would be required to convince them of a manageable reduction for the debtor. Thisrequires a good understanding of the market situation, settlement regulations and the human psyche, which is not so potent with a layman debtor. Thus, it’s best left to the seasoned debt settlementpros.
Creditors won’t agree to reduce debt
Yes, it’s true that nobody wants to let go of his agreed money, but then, something is better than nothing. When your creditors see that you are actually unable to pay off the full amount and are on the verge of bankruptcy, they won’t risk not getting at least something from you. The best debt settlement companies can reduce your debt by 50 to 60%.
Debt settlement programs work with all forms of debts
No, debt settlement programs do not work with all forms of debts and these plans are usually concerned with the unsecured debts- such as credit card debts, personal loans, medical bills, business debts, some student debts as well as collections and repossessions. Debt settlement plans won’t help you with regards to lawsuits, utility bills, government loans, auto loans, home loans, IRS debt and back taxes and other forms of secured debt.
Settlement plans need upfront fees
This is completely wrong today. As per the 2010 Federal Trade Commission ruling, the debt settlement companies cannot demand upfront fees from the clients- it’s legally banned. They can only ask for fees when the debt has been settled finally. If your chosen debt settlement company asks for fees, you should not delay to look for another company.
Settlement companies have relations with the creditors
This is not true and creditors do not prefer to nurture special bonds with the settlement companies. On the other hand, creditors would prefer relations with you since you are the client.
It just shifts debts
People often confuse debt settlement with debt consolidation and wrongly conceive that you would have to take a new loan for debt settlement, which is usual with debt consolidation. However, debt settlement involves a reduction of the existing debt amount and there is no question of a new loan here.