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Debt Settlement
Help |
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Call Today: (877) 274-1260 |
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If you
successfully complete our program, it’s possible
that you’ll enjoy these benefits: |
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Settle your debts for less than you owe |
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(read here for full details about how much you can expect to save) |
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Resolve your unsecured debts in 18 to 60 months |
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(read here for full details on how
long our program lasts) |
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No Up Front Fees - Don't Pay Till You See Results! |
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| Pitfalls of
Debt Settlement |
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Debt settlement is an innovative way to avoid bankruptcy. Of all the
debt relief and debt reduction options available, in cases where the
program is completed and accounts are settled, it is the fastest and
most cost-effective way to get out of debt without the credit
implications of bankruptcy. Like each debt relief option available
to consumers, however, it does have disadvantages that should be
disclosed prior to signing up for a settlement program. Although all
of the downsides of a debt settlement program should be noted and
carefully analyzed against the backdrop of your financial situation,
many of the common criticisms of debt settlement fail to address the
fact that many of these disadvantages are unimportant for truly
overextended consumers. The purpose of this series is to shed light
on potential pitfalls of debt settlement and help consumers decipher
whether these disadvantages actually relate to their situation. |
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| Debt Settlement
Damages Your Credit |
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In order for settlements to be reached, debt negotiation
clients voluntarily fall behind on their payments. The
reason for this is simple: for one, they should no
longer be able to afford the payments to begin with.
Secondly, if a creditor is getting paid each month
according to the terms they stipulate, they have no
incentive to accept a lump sum for less than what’s owed
in full satisfaction of an outstanding debt. Moreover,
since funds are rarely available upon enrollment into a
settlement program, consumers need time to save money in
order to pay off their creditors. As the account falls
behind and the consumer saves money, creditors report
the debt as past due to the credit reporting agencies,
which obviously damages your credit.
For many consumers considering debt settlement, however,
either keeping up the minimum payments is unrealistic
anyway or doing so in favor of fulfilling basic needs is
illogical. By entering into a settlement program, these
consumers can do damage control by avoiding bankruptcy.
Also, despite popular misconceptions to the contrary,
your credit history only makes up a portion of your
credit score, albeit an extremely important portion. In
fact, according to MyFico.Com, the credit history
component makes up approximately 35% of your credit
score. Given the importance of your amounts owed (30%),
in theory the long-term damage to your credit score
should be far from catastrophic or impossible to recover
from.
Finally, for consumers buried by credit card debt with
no realistic expectation of being able to pay down, the
credit sacrifice may be worth it, particularly
considering the interest rates currently being charged.
In other words, what sense does it make to pay $40,000
of credit card debt at 25-30% interest just for the sake
of preserving your credit history, which as we
mentioned, makes up a large but not overwhelming portion
of your credit score anyway. After all, the purpose of
good credit is to save money on interest or loans that
otherwise would not be available to you. A consumer who
is just barely able to afford the minimum payment on
$40,000 of credit card debt can pay up to $80,000 in
finance charges alone. If you can afford to pay more
than the minimums and get out from under your credit
cards, then this is a different story and debt
settlement may not be your best option. Follow this
link to learn about another
disadvantage
of debt settlement
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