Debt Settlement Pros & Cons

If you are struggling with a heavy load of debt and are feeling overwhelmed, debt settlement might be the right solution for you. Debt settlement with ClearOne Advantage not only offers projection by saving a considerable amount of money, but it is the only debt relief option besides bankruptcy that can actually reduce the amount of your principal debt.

According to the American Fair Credit Council's 2019 National Economic Impact Study of the Debt Settlement Industry, in 2018, the average settlement amount was approximately 55 percent of the debt held by the debtor at enrollment. Even after deducting fees paid to debt settlement companies, the average client saved approximately 37 percent.

At ClearOne Advantage our goal is to negotiate the best deal possible for you with each of your creditors. To get a better understanding of how much you could possibly save, you should get a free debt analysis and savings estimate specific to your situation from one of our Certified Debt Specialists.

How Does Debt Settlement Work?

Before we move on to the pros and cons of debt settlement, you should understand what debt settlement involves and what the debt settlement process is. Debt settlement is different from debt consolidation loans, a debt management plan, or nonprofit credit counseling. While DIY debt settlement may be an option, working with a reputable debt settlement company can multiply the benefits you may be able to get from debt settlement.

It all starts with a simple phone call that only takes about 20 minutes. A ClearOne Advantage Certified Debt Specialist will ask a few simple questions to review your financial situation and find creditors who may be willing to agree to settle your debt for less than you currently owe.

When you have agreed to the plan your Certified Debt Specialist presents to you and which you are able to afford, you stop making payments to the creditors identified in the plan and start making deposits to an savings account ClearOne sets up for you instead.

ClearOne does the rest of the heavy lifting, negotiating with your creditors to reduce your debt on our behalf. You owe no upfront fees.

 

ClearOne Debt Settlement Pros and Cons Couple

Defeat Your Debt the Smart Way
Consider how much you can save every month in settling your debt. Deal with debt repayment, regain control of your finances, and start living again.

The most important advantage of debt settlement is that it can save you money and get you out of debt in a reasonable timeframe.

Debt Settlement

Advantages

  • In addition to the debt ClearOne Advantage can eliminate through negotiation, you also save the interest that you would have otherwise had to pay on the full amount of debt.
  • With a Debt Settlement Plan (DSP), you get to discharge your debts one at a time. This way, if you terminate your program before full completion, you will have still effectively dealt with some of your debt.
  • You retain full veto rights over your DSP. We only charge you fees on settlements you approve, after ClearOne concludes the renegotiation.
  • Debt settlement is the only debt resolution method that does not entail upfront costs.
  • Through debt settlement, you can address other types of debt rather than just credit card debt, including all unsecured debt (like private student loans).
  • The success rate of the method is superior to other debt resolution options. Some 61 percent of those who participated in a DSP settled at least one account.
  • The FDIC-insured dedicated savings account that you use for your DSP payments remains under your full control.

Potential Disadvantages

  • Debt settlement is an aggressive approach to eliminating debt and some creditors may not agree to negotiate. However, your debt settlement firm knows which of your creditors is most likely to settle and is therefore in the best position to reach an agreement that favors you.
  • Debt settlement affects your credit score, but not as much as it would suffer if you chose to file for bankruptcy instead (bankruptcy remains on your credit report for seven years). Realistically, however, if you are struggling to make payments now, it is quite possible that your credit score has already taken a hit.
  • One of the risks of debt settlement is that the money you save through debt settlement may be considered taxable income and carry tax obligations1. With some exemptions, such savings are considered income. Your tax attorney can tell you more about how debt settlement will impact your tax situation.

1IRS Topic No. 431 Canceled Debt – Is It Taxable or Not?

 

Debt Settlement Alternatives

If you think debt settlement isn't working for you, there are always other options available. These alternatives could provide you temporary relief without harming your credit as much as debt settlement would.

Balance Transfer Credit Card

With a balance transfer credit card, you can move high-interest debt to a new card that has a lower interest rate and an introductory 0% APR term. This means that balance transfer credit cards can help you lower interest payments, pay off your debt more quickly, and make the payment process more manageable.

Debt Consolidation Loan

This kind of plan uses a new loan with a fixed interest rate to pay off several debts. This particular type of loan is a great option for those who have several high-interest loans. Based on the terms of the new loan, a debt consolidation loan simplifies the repayment process helping you stay ahead of payments, thus reducing your debt more efficiently.

Debt Snowball Method

The Debt Snowball process prioritizes paying off your smallest debt first. If you have many creditors you are not always sure which is top on the list to pay off first. This method helps identify your smallest debts, pay them off faster, and then focus on those with bigger balances. The process gives you a sense of accomplishment helping you stay motivated.

Debt Avalanche Method

The debt avalanche method is the opposite of the debt snowball approach. With the debt avalanche strategy, you target paying off debts with high interest rates first. This aims at saving money in the long run by reducing the amount of monthly interest payments.

Credit Counseling

Through this debt resolution method, you work with a certified counselor to plan a personalized debt management solution. You pay the credit counseling agency and they deal directly with your creditors. The goal of the CCA is to negotiate with creditors to reduce interest rates and penalty forgiveness.

Next Steps for Debt Settlement

If you have explored all debt relief strategies and have decided to opt for a debt settlement plan, here are the next steps to follow and take control of your finances.

  1. Estimate your current financial situation. Make a short list of your debts that includes amounts owed and the interest rates. This way, you can have a clearer picture in your mind to help you understand if debt settlement is a positive or negative option for your personal finances.
  2. Contact your creditors. Contacting your creditors is the first step to finding a realistic solution by collecting the essential information. Creditors will explain in detail who you owe, how far behind you are on the payments, and how much money you have to negotiate with.
  3. Contact a Debt Settlement company like ClearOne Advantage. DIY debt settlement is not the right choice for everyone. You may be a great negotiator, but when it comes to saving money you need to be really careful to know what’s best in the long run. Debt settlement companies have expert Certified Debt Specialists to ensure that you are getting the biggest savings when you negotiate a debt settlement plan.

Is Debt Settlement Right for You?

For more information contact a ClearOne Advantage Certified Debt Specialist at 866-481-1597. They can help you determine if debt settlement is the right option to help you pay off debt, as well as help you put together a customized solution to fit your financial situation, budget, and the amount you owe. Repay your debt the smart way. Find out how today.

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I wish to thank you for all of your agency support and encouragement. The last two months have been very stressful due to the accounts going legal. It has been also very rewarding to get through this process and have a good grip on our future and we have started this planning and example for our children.

Joseph and Michele, PA