If you are experiencing problems in paying your debts, you might be looking for the best option to get rid of your debts. You will be happy to know that it is a workable option to reduce your debts and live a good life. However, it is important to understand the challenges you may face because of debt settlement. Sometimes, debtors have to contact Zero Debt Law Firm because they have been scammed by debt settlement companies.
Getting familiar with the debt settlement
Debt settlement can be defined as a way to deal with debts by paying a portion of it in a lump sum. To get it settled, the debtor will need to get in touch with the creditor to explain his financial condition. If the creditor agrees, they both work on a lower amount to be paid collectively. It gives relief to the debtor because he does not need to pay a huge amount in one go. At the same time, the creditor gets a chance to recover the money he has borrowed. It might be lesser than what he owed him originally. However, it is better to get something than to get nothing at all.
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Possible problems with debt settlement
It may sound like an easy task to get done. However, debt settlement can be a hard way to deal with your finances. Some of the risks associated with it are elaborated on below:
Problems negotiating with the creditor
You might think that all creditors are ready to lower the amount. On the contrary, creditors have other rights to utilize to recover the debt such as filing a lawsuit or hiring a debt collector. Not all of them are ready to negotiate. Sometimes, you might have to wait until the case goes to a debt collector because he can negotiate to reduce the debt.
Hurting your credit scores
Many people don’t pay much attention to credit scores. However, the “settled” status will reflect in your report for about seven years and you will not be able to take any financial support from the lenders. You might face several problems in taking an education loan or home loan.
Paying fees to settle the amount
If you have contacted a debt settlement company to settle your amount, you will need to pay a huge amount to them as well.
Depending on your situation, you should make the right decision and settle your debt.