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When Does Debt Settlement Make Sense?

Debt settlement seems like an easy way out of your debt. Simply ask your creditors to take less money – it is that simple. Debt settlement involves paying 30% to 70% of delinquent debt. The terms for the settlement may be negotiated by yourself or by a third party. Full disclosure of your financial affairs is required by your creditors. Based on that disclosure, creditors then determine the acceptable settlement amount.

What could be easier then debt settlement?

But there are some gotchas.

Debt Settlement has a few prerequisites:

  • Unsecured debts must be three or more months in arrears
  • Settlement is not an option on secured debt is such as a car or a house.
  • A lump sum amount of cash is required to make the final payment. It is rare that instalments will be accepted under these circumstances.

If you decide to settle your debt, make sure you engage the services of a reputable debt settlement company.  Make sure that the payments made by you to settle the debt are final and without recourse. Get everything in writing from your creditors before making a payment and make no payments in advance.  Pay the lender directly via money order or certified cheque – do not use a personal cheque.

Let’s explore the advantages and disadvantages of debt settlement.

What are the advantages of Debt Settlement?

If you have one or two credit accounts to settle on, you may be in a position to settle all delinquent debts. A settlement will stop collection calls and legal action from creditors.  Debt settlement can save you 30-70% up front, plus the interest. Debt settlement lowers your overall indebtedness.

What are the disadvantages of Debt Settlement?

Debt settlement will not be a gold star on your credit report. Debt settlement has some disadvantages:

  • You must pay the settlement amount in full,
  • Settlement will impact your credit negatively. Providing that there are no further delinquencies and your bills are paid on time, the impact on your credit is short lived. Your credit rating will recover gradually over time.
  • Debt settlement takes time to complete
  • Watch for the fees of the 3rd party that settle your debts(can be very expensive)

How debt settlement companies are paid?

Debt settlement service is not free. You will be charged a percentage of the total debt or a percentage of the debt savings. Some Debt settlement companies charge a fee upfront, while others deduct their fees from the payment made to creditors.

Do not despair! If debt settlement is not be the right option for you; there are more effective options that enable you get out of debt faster.

Click here now to fill out our no-obligation financial assessment. We will tell you if debt settlement is your only option and what actions you should take to get out of debt.

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September 26 2007 – We came to you as first time buyers with some consumer debts after our bank gave the running around, seeking mortgage, we got home with far beyond that. Not only had you secured us an approval within 24 hours, you gave us the best rate at the time, and long lasting debt management help that has saved us considerable money and widened our smile; you helped changing our lives to the better.
Walid Bechara & Farah Dbouk
December 22, 2005 – We would recommend George Kaadi and his firm of experts with extremely high regard and confidence to our closest friends and family members. We only wish we had been introduced sooner, as we know George would have helped us to make better decisions about our future financial plans.
Bruce and Joanne H.
September 19 2007 – Based on the information he provided we were able to choose a strategy that was best suited to our situation and constraints. As such, he showed us how to use discipline and pay off our debts to then build and emergency fund and to invest our savings in vehicles I would not have come across talking to my banker. He taught me about tax savings and leveraging existing rules to increase my retirement fund using money the government would have simply kept to himself!
Andras Kovats
November 14 2007 I just wanted to say thank you for all the help that you provided my husband and I for our refinancing when we were having problems getting information from our bank for the same. Your knowledge and understanding of finances helped us to make the right decisions regarding our financial situation and living is now bearable and we can see light at the end of the tunnel after only a few short months, which is certainly not what the bank was helping us to do. We appreciate all th…
S. and J. McKenzie
August 25 2006 – George provided excellent service as our Mortgage Broker, he was friendly, flexible and able to handle what was potentially a problematic situation. He always offered sound advice and had our best interests in mind at all time. I would highly recommend him.
Grant Pennell - Inside Sales Manager