Debt settlement is the process of negotiating with creditors to accept an amount that is less than the full balance owed on a debt. The settlement can be partial or complete, depending on how much you are able to pay off. When negotiating for lower payments, it’s important not to default on your program because this could lead to losing settlement agreements with the creditor. All programs are tailor made to suit your specific budget and the debts you choose to enroll into the program.
According to AFCC data:
Debt settlement is by far the cheapest option compared to credit counseling or making minimum monthly payments, as the following numbers indicate:
- 95% of debt settlement clients receive savings in excess of fees
- Most consumers see initial account settlements within 4-6 months of enrollment
- Debt settlement clients pay no fees until settlements
The primary benefit of debt settlement is the fact that you can negotiate your debt balance down to a lower amount and make one payment rather than many. If the creditor agrees, they will stop charging interest and reporting negative information to credit bureaus, which may allow for an improved score.