Essentially, the borrower’s representative negotiates with the creditor to reduce the overall debt with an agreement that monthly payments will be made. Now, unfortunately for me and many other people out there, this does not apply to student loans or car loans. I guess it can’t always be about us, even though we wish it was! Anyway, debt settlement is a good alternative because at the end of the day the creditor and debtor are happy…YAY! They are so happy that they could go out and buy themselves a present, until the debtor remembers the situation that he’s still in! And for the creditor, well, I doubt they are making any extra money apart from their salary for settling your debt.
At least the creditor is satisfied because they are still being paid some money even if it is not the full amount that was owed. This is good because the creditor can regain the trust that the debtor will pay them back and not have to file for bankruptcy. This also saves the debtor from attorney fees and stress of going through the bankruptcy process.
The best thing about debt settlement is that most accounts will be reported as being paid in full; And the overall speed in which a person’s debt can disappear is enticing. This can take a load off both the debtor’s and creditor’s shoulders. I think at one point or another, we all know what that heavy load feels like to carry!
Unfortunately the debtor has to bite the bullet and accept the fact that their credit score will be affected. It will not be ruined but you may see a significant drop. You may rest assured in knowing that once each account is settled your debt will disappear and your credit score will increase. I know that will save many of us from sleepless nights!