Debt settlement information – Facts vs. Fictions

Posted by John Morgan on November 24, 2010 under Credit Card Debt Management | 3 Comments to Read

Debt settlement information – Facts vs. Fictions

Author: Robin Williams

With the sluggish state of the US economy, a huge number of people are finding their unsecured debt rising to a level that will soon spiral out of control. What are the options that can reduce your debt amount so that you need not pay off the entire amount that you owe to your creditors? Well, with proper debt settlements, you can easily get rid of your debts by paying off an amount that is much less than the amount that you actually owe. But there are a few facts and fictions associated with debt settlement. You must be aware of the fictions so that you are not duped by your creditors into a bad deal where you end up losing more money than you owed. Read on to know more about it.

1. Huge upfront fees: Most debt settlement companies are known for taking huge upfront fees from their consumers. This is the most important fact of using a debt settlement company to settle your debts. Debt consultants charge high fees for settling your debts before providing you with any single service. But after the FTC has passed the new set of rules, it has banned all for profit debt settlement companies from charging upfront fees before settling your debts or negotiating with your creditors. Thus, you must be aware that after the FTC’s new rules, no company can charge you huge fees before providing you with their services.

2. Reducing your debt amount to its half: The fake promises of the debt consultants that they will reduce your debt amount by 50%, is a fiction. It is rarely possible for the debt consultants to reduce your debt amount by 50%. They actually make these grandiose promises with intention of keeping. Thus, the actual fact is that debt settlements cannot chop off your huge debt amounts, you have to pay off your debts in affordable monthly payments to keep your debt settlement request active.

3. Effect on your credit score: The fact that debt settlement does not affect your credit score is a fiction. Among all the debt relief options available, debt settlement hurts your credit score terribly. Most debt consultants do not inform you about this impact on the credit score as they fear to lose customers like this. But after the FTC’s new rules, they are bound by the law to disclose everything about their services including the impact it has on your credit score.

Thus, before settling your debts, know how to differentiate between the facts and the fictions related with it. Debt settlements can help you eliminate debt but you need to stay watchful to protect your credit score from being hit.

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