Can Debt Reduction Cost You?

The savings from our debt reduction program are tremendous. By reducing debt amounts owed and not just the interest rate, settlement is an extremely cost-effective method for debt relief. Just making the minimum payments can cost as much as 3 times the balance owed before one is finally debt free. So for a $10,000 debt you end up paying $20,000 in interest alone! By negotiating the balance owed, in reality your savings constitute the reduction on the principal and the interest charges that would otherwise accrue. This being the case, debt settlement is a great option for consumers who are overwhelmed by their minimum payments and don’t find themselves actually bringing down their debt. That being said, however, debt negotiation is not for everyone. Three scenarios in particular stick out as examples of when debt reduction may not be your most cost-effective option: a) you have a high credit score; b) your debt amount is not high, or c) both.

The reason? Future interest charges may outweigh what we save you. Even though debt reduction can save you tremendous amounts of money, it is possible that you’ll end up paying more in subsequent interest because debt settlement affects your credit score negatively and hence, the interest rate of your next loan.

Needless to say, the impact of settlement on your credit is more dramatic if you have a higher score. So if you have perfect credit when you enter a negotiation program, the subsequent higher interest rates that you’ll obtain when applying for loans may end up costing you more than we’re able to save you. This being the case, consumers with very high credit scores or low debt amounts should consider the following prior to doing debt settlement:

-How desperate is your situation? If it’s likely that the minimum payments will overwhelm you, what options are available to you? Can you refinance your home or get a home equity loan? If any of these options are available to you and you can afford it (be very careful though…you don’t want to lose your home!), then debt reduction may not be your best bet.

-When do I plan on applying for credit again? Generally, lenders look back at the past 2 years of your credit history. Like most things, time heals the credit impact of debt negotiation, so the longer you can hold out on applying for credit, the better off you’ll be.

-If you do plan on using credit, what sort of loan will you be applying for? The cost associated with doing debt negotiation will be higher for getting a mortgage than if you apply for car loan. After all, 10% interest on a $200,000 loan is a lot more expensive than 10% on a $20,000 vehicle.

In the end, debt reduction is a great option, but the future implications of enrolling in our program should always be considered beforehand. We’re confident that we can help resolve any outstanding credit card debt, repossessions, or medical bills, but it is important that you first understand how our program will fit into your individual situation.

If you’re interested in discussing whether debt negotiation is the right program for you, please feel free to talk to one of our honest and ethical consultants at (877) 274-1260, or you can fill out a form and we’ll contact you as soon as possible.