Whenever people find themselves drowned in huge amount of debt, and can't seem to pay that off, they mostly go for debt settlement, because it lowers the outstanding debt amount by 40-60%. Thus, it becomes much easier to pay off the debt. However, before opting for debt settlement solutions, one should know the actual facts or rather the myths about debt settlement. The myths about debt settlement solutions:
1. Debt settlement doesn't hurt score - According to many service providers and debtors, debt settlement does not hurt the debtor's score negatively. However, the truth is that debt settlement lowers the credit score. Before you can negotiate a debt settlement, you will have to miss the payments. Missing the payments is going to ding your score.
2. All creditors agree to debt settlement - All creditors or collection agencies may not agree to your debt settlement options. They are in no way legally bound to agree to your settlement request.
3. Debt settlement companies are helpful - Debt settlement companies are not always helpful. It is true that they negotiate with your creditors on your behalf. However, you need to pay them; generally the cost is 10% of the outstanding debt amount. Moreover, not all of these companies are authentic. You can rather try negotiating debt settlement with your creditors.
4. Money sent to the debt settlement company is safe - This is not true. You never know what the settlement company may do with your money. If it is a scam company they may try to get away with your money.
5. Debt settlement is going to eliminate debt in 12 months - There is no such fixed time within which you will be able to pay off your debts under debt settlement program. It depends on the debt amount, and your ability to make payments.
6. It cuts debt by half - It is a common belief among debtor's that debt settlement can cut the debt by half. However, this is not true. It generally reduces by 40-60%, but this does not mean that all credit card companies may agree to reduce your debt always by 40-60%. They may allow only 20 or 30% reduction.
Most people believe that debt settlement solutions or bankruptcy is the only way out of debt. However, this is not true, as you can also try to pay off your debts through budgeting or debt consolidation.