If you’re on our website, you’re probably know that debt settlement can seem like an attractive option for those struggling with overwhelming financial obligations.
While these debt settlement can reduce your debt, there are several important factors to consider before deciding to use our services. This article outlines crucial points to watch out for if you’re planning to use ours or any other company’s debt settlement services so you can make an educated decision when it comes to resolving your debt.
Understand the Process and Its Implications
Debt settlement involves negotiating with creditors to pay less than what you owe. While this can provide relief, it’s essential to understand that:
- Your credit score will likely suffer on the short term, as you’ll need to stop paying creditors during negotiations.
- Settled debts may be reported as “settled for less than the full amount” on your credit report.
- There may be tax implications, as forgiven debt can be considered taxable income.
Although your credit score might go down a little on the short term, keep in mind that in most cases, with your current debt, you can’t do much with your credit either way. Simply said, a credit score of 680 (when you have debts) vs 620 (when you settle your debt) won’t make a difference in your life in the short term.
The idea is that since you’re not using your credit card due to the low score, it might be beneficial to just have it dip a bit lower temporary instead of having it stay low forever while you pay high interest on your debt.
Be Wary of Unrealistic Promises
Some debt settlement companies make grandiose claims about their ability to reduce your debt. Be cautious of promises that sound too good to be true, such as:
- Guarantees to eliminate a specific percentage of your debt
- Assurances of settling your debt in an unrealistically short timeframe
- Claims of being able to stop all collection calls and lawsuits
Remember, legitimate companies such as Alesure cannot guarantee specific results, as outcomes depend on negotiations with individual creditors.
We usually mention an estimate number based on the average our clients save, but your results can be better or worse and we won’t know until the settlement process has been started.
Scrutinize Fee Structures
Debt settlement companies typically charge 10% to 25% of your debt as fees for their services but remember a few important points:
- Upfront fees: It’s illegal for debt settlement companies to charge fees before they’ve settled or reduced your debt.
- High fees: Some companies charge exorbitant fees, sometimes up to 45% of the enrolled debt. We don’t recommend working with these companies as your savings won’t amount to much.
- Hidden charges: Always read the fine print to understand all potential costs and see if your potential legal fees are covered by the company.
A great rule to remember is that personal debt relief companies can’t charge you upfront, and if a company is doing so, that’s generally a red flag and you must avoid them.
Consider the Timeframe
Debt settlement is not a quick fix. The process typically takes 1 to 4 years, during which:
- You’ll need to save money in a dedicated account to fund settlements.
- Your debts may continue to accrue interest and fees until it’s settled.
- You may face increased collection efforts from creditors.
Remember that like any relief process, this takes time and if a company is not being honest or realistic about it, you must avoid them.
Additionally, the timeframe is something you must consider as well in case if you’re planning to use your credit in the next few years, debt settlement might not be a good option for you.
With everything mentioned above, if you think debt settlement is a good option for your financial path, we recommend speaking with one of our debt advisors.
With over 20 years of experience in the debt settlement industry, Alesure’s team and its partners will ensure you’ll get the best possible debt settlement offer and will achieve financial freedom as fast as possible!
