Some financial experts do not encourage debtors to go for debt settlement because the credit score of the debtors will be damaged.
When a person has decided to settle his or her debt, he or she will definitely need to stop payment for quite a long time, say 3-6 months.
The late payments have caused negative impact to a person's credit file.
However, there are 2 main positive effects that you should take into consideration.
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1 - Enjoying Debt Reduction Only debt negotiation can help the debtors to reduce their outstanding balances.
When a person is experiencing financial hardship, he or she is advised to contact the creditors to bargain for lower debt repayment based on their current financial situation.
The debtors can either request their creditors to forgive partial of their debt or to reduce the high interests.
If the creditors do not agree to reduce the total debt amount, the debtors still can request the lenders to waive some fees.
I would say debt settlement is a cost saving financial solution.
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2 - Become Debt Free The duration required to eliminate the debt is around 2 years.
It is considered quite a short period.
After the settlement process is completed, you are considered debt free.
Once you have made the payment according to the settlement amount as agreed, the creditors or other debt collection agencies have no right to claim the forgiven amount from you in the future.
You are set free! Although the debtors' credit is affected, there are ways to fix the credit gradually after you become debt free.
The most important thing you need to do now is to get rid of the outstanding balances and get your finances back to control.
Do the credit improvement later.