Illinois residents who are heavily in debt often face harassing calls from debt collectors. Debt settlement is a solution that might provide relief from collection activity.
What is debt settlement?
Debt settlement is an option for individuals with debt but no foreseeable way to pay it back to alleviate their financial burden. It can be used to satisfy debt after an agreement has been reached with a creditor because that creditor has agreed to take less money than what is actually owed. Usually, interest rates and other fees are forgiven to make it easier for the debt to be paid back.
While debt settlement is a good option for many consumers, it also has certain risks. It could negatively impact a person’s credit, is sometimes expensive and could take years to reach a settlement with a creditor.
How does debt settlement work?
Debt settlement is often referred to as debt relief. If you decide to use it to pay back your creditors and satisfy your debt, you work with a debt settlement company that helps by negotiating a settlement amount with your creditors. Although creditors who agree on a lower amount to satisfy their debt often waive interest rates and fees, the debt settlement company requires a fee. This fee is usually included as a percentage of the money you save with your debt settlement.
Often, when you rely on debt settlement, you are required to pay a lump sum to your creditors. Although this might seem overwhelming, it’s usually better because it eliminates the debt immediately upon the single payment and is still less money than what you would have owed without the option of debt settlement.
Debt settlement might work for you if the company you select to help you is successful in reaching an agreement with your creditors. If you’re unable to find other options for paying back debt, it might be appropriate for you.