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Areas to Analyze in Debt Settlement Companies

By Eric Desuza posted Fri March 27, 2020 01:02 AM


For any credit card owner, getting deeper into debt is very easy. You can easily feel overwhelmed with your limit, and the consequence is having difficulties in repaying. At one point, people even give up and end up deteriorating their credit score. 

But what if someone says that you don’t have to give up too much to resolve your situation? Won’t it answer all your questions?

This is where settlement companies have to step in. As the name suggests, debt settlement companies negotiate with your creditor to pay a settlement amount and resolve your debt. However, not everyone gets the expected outcome out of it. These settlements might take months to complete. 

You cannot get rid of the risks that are involved in the debt settlement process. Let’s go through these risks and analyze any other method if it exists.

Risks Involved in Debt Settlement

Let’s get straight to the point 

  • Your creditor might or might not agree to the negotiation done by your credit repair customer service. It’s a significant risk, and if you owe a tremendous amount to your credit, paying instantly isn’t easy as well. 
  • At first, debt settlement negotiations can affect your credit score adversely because you stop sending any payments in the initial stages. After the negotiation is complete, you resume it. 
  • You have to deposit some money in the savings account for the first 36 months before the settlement occurs. So, you have to review your budget carefully and assess if you are financially capable to keep that much amount in the account
  • There is always a risk of getting into debt settlement scams by these companies. People often mislead others to gain profit. Make sure you contact someone who has some history of settling debts of others. 
  • Then comes the risk of incompetency from your respective credit repair service. One can easily think that the situation is in control, but sometimes it’s not. There’s a lot involved in this process of settlement because you need to communicate with a creditor in a formal setting with the utmost convincing skills. Do not fall for the following services. 
    • The ones who charge money before doing anything.
    • Do not let you communicate with your creditors. 
    • Guarantee that your debt will be settled within a certain period. 
    • Tell you do not to pick up any debt collection calls. 

Proper research for a debt settlement company

In order to avoid any of the above risks, you need to research for debt settlement companies in advance. You have to do your homework to prevent being misled. Your decision has to be very informative. The following factors are involved while researching for debt settlement companies. 

  • Disclosure

There are always specific disclosure requirements for any debt settlement companies. The following list contains each disclosure requirement. 

  1. The actual fees that they charge in certain situations. 
  2. The results they had for their previous customers, along with the time taken. 
  3. If the company tells you to stop any payment, it should give enough reasons to do so. You rely on them, and any positive or negative consequence should be known. 
  4. The company should disclose all the offers that include all types of plans you have on offer. 
  5. They should also give you advice if a particular plan is beneficial for your situation. 

Once the above disclosure requirements are fulfilled, you should assess the tax consequences of each plan. Relate it with your financial position, and you’ll find the way. But make sure you have a professional credit repair backing you in making all these decisions.