There are many ways a person can get rid of obligations. You can choose to go for a credit support service or milk a debt settlement program. These two options may seem the same but it is not. Basically, a credit counseling service gives the desperately required finance direction for the person in debt. It also aims to reduce debt by giving the indebted person several options to do so.
In contrast, a debt settlement program works for a reduced-balanced settlement. This just means that you can eliminate your debt by paying an amount lower than your original balance. For example, you've a debt amounting to $5000 to a certain lender. With debt settlement, it is pretty much possible for you to settle your $5000 debt by paying $3500 in full.
In a this type of program, all you have to do is to go to a debt settlement company and ask about their services. Typically, the process is such that you pay your monthly dues to the debt settlement company rather than immediately paying it to your bank. The debt settlement company then keeps your payment as a settlement fund. On reaching a substantial amount of money, they may then conduct negotiations with your original banks so you can pay off your debt in a smaller amount.
If you come to consider it, this is a good way to get rid of your loans. But you have to consider carefully about this option because there are negative aspects about it.
The first being that going into a this kind of program is that it can severely affect your credit report. Most creditors are not happy with monthly payments as a strategy of paying your dues. And naturally, you won't be at ease if you are asked to pay your dues completely. So, you resort to waiting for your settlement fund to grow and stop paying at once to your lender.
But little do you know that even if you go for a debt settlement program, your account will still continue to be overdue. And an overdue account equals a negative credit history. Since your account is considered overdue, you may expect to get hectoring collection calls and letters notwithstanding going for a debt settlement program. Not only this, you can even be sued by your bank if you continue to miss your payments.
Even if you save a lot by paying less than what you owe, the balance that your lender has relieved you of can be taxed by the IRS. Thus, it is necessary for you to check with your tax adviser for the right information regarding this scenario. Nonetheless, debt settlement is sufficient in scenarios when an individual's credit history has been damaged. But if the credit report can still be salvaged from a negative rating, debt settlement should be steered clear of.
On the other hand, a debt management program helps a person get rid of debts by negotiating IRs and fees. It also extends the payment details of your balance. Similar to a debt settlement program, you also have to make payments to the managing company but these payments will immediately be distributed to your lender within a week.
These are the areas where a debt settlement program and a support service differ. If you feel that you need to avail of any of these options, be certain to talk to your financial confidant before you make a call.
In contrast, a debt settlement program works for a reduced-balanced settlement. This just means that you can eliminate your debt by paying an amount lower than your original balance. For example, you've a debt amounting to $5000 to a certain lender. With debt settlement, it is pretty much possible for you to settle your $5000 debt by paying $3500 in full.
In a this type of program, all you have to do is to go to a debt settlement company and ask about their services. Typically, the process is such that you pay your monthly dues to the debt settlement company rather than immediately paying it to your bank. The debt settlement company then keeps your payment as a settlement fund. On reaching a substantial amount of money, they may then conduct negotiations with your original banks so you can pay off your debt in a smaller amount.
If you come to consider it, this is a good way to get rid of your loans. But you have to consider carefully about this option because there are negative aspects about it.
The first being that going into a this kind of program is that it can severely affect your credit report. Most creditors are not happy with monthly payments as a strategy of paying your dues. And naturally, you won't be at ease if you are asked to pay your dues completely. So, you resort to waiting for your settlement fund to grow and stop paying at once to your lender.
But little do you know that even if you go for a debt settlement program, your account will still continue to be overdue. And an overdue account equals a negative credit history. Since your account is considered overdue, you may expect to get hectoring collection calls and letters notwithstanding going for a debt settlement program. Not only this, you can even be sued by your bank if you continue to miss your payments.
Even if you save a lot by paying less than what you owe, the balance that your lender has relieved you of can be taxed by the IRS. Thus, it is necessary for you to check with your tax adviser for the right information regarding this scenario. Nonetheless, debt settlement is sufficient in scenarios when an individual's credit history has been damaged. But if the credit report can still be salvaged from a negative rating, debt settlement should be steered clear of.
On the other hand, a debt management program helps a person get rid of debts by negotiating IRs and fees. It also extends the payment details of your balance. Similar to a debt settlement program, you also have to make payments to the managing company but these payments will immediately be distributed to your lender within a week.
These are the areas where a debt settlement program and a support service differ. If you feel that you need to avail of any of these options, be certain to talk to your financial confidant before you make a call.
About the Author:
Managing dept can get entangled. Before filing for bankruptcy, go to Arc Financial, we have the experience negotiating with creditors and get more information on what is a debt settlement strategy today!
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