If you feel like your debts are weighing you down, you’re far from alone. The average American carries a whopping $90,460 in debt. From credit cards and car loans to student loans and mortgages, it’s hard to fund the things we need most without getting help paying.
But when those debts become overwhelming sources of stress, it’s worth noting that there’s an easy way to manage and even lower your bills: debt settlement. This option can be a great way to reduce your debt and get relief—as long as you proceed with care. Here’s what you should know.
What Is Debt Settlement?
Debt settlement is the process of negotiating with creditors to reduce how much money you owe. This allows you to pay a percentage of the amount you owe rather than the full amount.
To negotiate, you’ll work with a third-party company, often called a “debt settlement company” or a “debt settlement service provider.” These experts help contact creditors and negotiate a better payment plan on your behalf, though they’ll charge a fee for the service.
How Does Debt Settlement Work?
In general, you’ll begin by reaching out to a debt settlement company and give them the details of your debts, including what you owe and to which creditors. The company will begin negotiating on your behalf.
During this time, you should continue making payments toward your debts. Stopping payments, even while negotiations are in progress, can harm your credit score.
Once everyone has agreed about the new terms of your debt and repayment plan, you’ll continue making payments—often in far lower amounts than what you were expected to pay before—until the reduced lump sum is paid.
How Do You Get Started With the Process?
If you do your research and believe debt settlement programs are your best option, you’ll want to find the right company to work with.
Look for a company with a strong reputation for customer service and support, as well as one with a high score with the Better Business Bureau. Accreditations with consumer protection groups like the American Fair Credit Council are also a good sign. It can also be useful to see that the company treats its employees well, such as with options like Rightway Funding.
From there, you’ll want to ensure that you’re eligible: some companies have a minimum required debt amount. In addition, you might have better luck finding a company that specializes in a specific type of debt. Some companies, for example, are adept at credit card debt settlement, while others work with private student loans instead.
Last, but not least, don’t forget to compare and contrast the company’s fees based on your total debt.
Get the Fast Debt Relief You Need
Debt settlement isn’t without risks, though the reward—a lower lump-sum payment—can often make it worth trying. If you do your research and find that this process is your best option, make sure to consider the debt settlement company you choose with care. Partnering with the right company, especially when your money is at risk, can make all the difference!
If you’re in the market for more helpful finance tips, we’ve got you covered. Check out our other posts for additional insights and guides!