Do Debt Settlement Programs Work?

Debt settlement programs work to help you get control of your debt. A debt settlement program will negotiate with your creditors to lower your interest rates and reduce the amount of debt you pay. There are several different companies you can choose from, and you need to research the company before choosing a program to work with.

Benefits of Programs

In addition to working with your creditors, many debt settlement programs offer financial counseling. They will help you set up a monthly budget and teach you how to manage your money so you will not be in this situation again. They will handle the stress of talking to your creditors and make it so all you have to do is send them one monthly payment. This makes it easier to move forward and focus on your current financial situation.

Negative Aspects

When you work with a debt settlement company it will show on your credit report. This can lower your credit score, although it is less harmful than bankruptcy. Debt settlement can be expensive, and many debt settlement companies do not deliver on what they promise. They will take your money and not pay your debts, without you realizing what happened. Some companies are reputable, but you must do your research before choosing one.

Choosing the Right One

Contact your local Better Business Bureau to see if the debt settlement program has any complaints against it. You should also check to see if the company has been in business for several years. A new company may be more likely to disappear one day without notice, as opposed to one that has several years of experience. If you do not feel comfortable with the people who work there or with the operation do not do it.

Other Options

It is possible to work through debt settlement yourself by contacting your creditors. Most creditors will not settle debts until you have fallen behind on payments. If you are already behind, save up approximately 50 percent of what you owe and call and offer it as a settlement for payment in full. If the creditor agrees to the settlement, wait until it sends you a letter in writing that states it will accept the payment amount as payment in full for the debt. Keep the letter on file indefinitely. If you are not behind on payments, you can call your creditors to see if they will lower your monthly payments and interest rates. Then set up a debt payment plan to get out of debt. There are also non-profit credit counseling services that can help you with debt settlement for free.