Debt consolidation settlement can be an effective way to help you manage your debt and improve your financial future. There can be disadvantages to this type of settlement as well as distinct advantages. You have to weigh the pros and cons of this type of consolidation in order to decide whether or not it is the best solution in your particular situation.
Pros:
Depending on the specific deal your consolidation company works out, you can pay off your debt for significantly less than you owe. In some cases, credit companies might settle for as little as 40-60% of your original debt.
Using a debt consolidation company can ensure that you get out of debt more quickly than you would if you simply keep paying the minimum payments on your credit cards. This means that you can enjoy financial freedom sooner than in your current situation.
If you have fallen behind on bills and are considering filing bankruptcy, debt settlement can help you avoid bankruptcy. Bankruptcy filing involves attorneys and expensive legal fees which many people do not have the ability to pay.
Cons:
You have to actually be behind on your bills in order to be able to consolidate your debts. If you are not currently behind on them you will have to actually stop paying.
If you are not already receiving calls from your creditors, you will start to receive them when you began a debt consolidation plan. If you have hired a professional company to help with your settlement, they will probably talk to your creditors for you.
Any money that you save using a debt consolidation settlement will be treated as income and taxed accordingly. This is generally only a fraction of the amount that you will have saved in interest but it is something to take into account when making this decision.
Debt consolidation settlement is clearly not right in every situation but it can help you get out of debt quickly and manage your debt more effectively.
by Hector Milla
