Debt settlement is being used by many people who have overextended themselves and are drowning in debt. It is a very good alternative to bankruptcy. Below are the pros and cons to the debt settlement method so you can see if it is right for you.
Pros
Get Out of Debt Sooner – Using this method many people can eliminate their debt in 18 to 24 months, as opposed to just paying the minimum on your credit cards which could take you 40 – 60 years to pay off the balance.
Learn to Stay Out of Debt – By using this method, people often learn how to budget their money in order to save up for a settlement of their debt. After they have settled with the creditors these people can continue to use the budgeting skills they have learned and begin really saving and living within their means
Cons
Lowers Your Credit Score Temporarily – Debt settlement typically lowers your credit score for a period of time. However, when your debts are settled your credit score comes back up. Some people even end up with a better credit score than when they started the process.
May Need to Pay Taxes – People generally need to pay taxes on the amount that was forgiven to them by the creditors. However, this amount is typically much less that what would have been charged in interest over the course of the year. Check with your tax advisor considering taxes and debt settlement.
So, as you can see, the pros out weight the cons for using debt settlement for most people.
And if you would like more information about debt settlement and a free chapter of our “Finacial Solutions” Workbook along with three worksheets just go to http://www.remfinancialsolutions.com and sign up for our free newsletter. You will also receive helpful budgeting tips along with money saving ideas.
By: Mark Erickson – Financial Advisor with REM Financial Solutions
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