Why Debt Settlement is a Bad Option

Introduction
Debt settlement is considered a good alternative to bankruptcy, but is it really that good? Find out the answer from debt management services.

How Debt Settlement Works
Debt settlement companies act as savings account for debtors. They offer to save up a lump sum of your money, and, once it attains maturity, they negotiate with creditors to pay off your unsecured debt. It is one of the debt management services agencies offer to get you out of debt.

Debt Settlement – More Misleading Than Relief
Until now, this debt management option was regarded as a substitute for bankruptcy. A bankruptcy declaration can have a negative effect on your credit report and your future prospects for bank loans, insurance and even jobs. That’s why the debt settlement scheme was devised. But some thing things are too good to be true.

There are several debt management services agencies who charge exorbitant fees in the name of the negotiation and debt settlement process. They also don’t offer you any legal protection against the lawsuits of collection agents. This can make one question the true objective of these agencies. In fact, due to their steep fee structure, these debt settlement companies are being outlawed in many states.

Success Rate of the Debt Settlement Process
You might find this surprising, but debt management experts report that the success rate for debt settlement is very low. Of all the people approaching these self-proclaimed debt settling companies, only 2% manage to settle their debt successfully. Most debtors are forced to leave the settlement process mid way through because they become involved in lawsuits or debt garnishments from creditors. 

Impact on Taxes
Debt management experts also bring attention to another important issue – the consequences of tax on forgiven debt. The government considers this forgiven debt to be income and hence deducts tax from it. So if your debt settlement company gives you the idea that you can make a good profit, then you are being misguided. The profit you will make from forgiven debt will ultimately be taxed according to government income policy. 

Debt settlement is a good option only when handled by an efficient and genuine agency. Check with a licensed attorney who can guide you with good advice.

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Debt Management – A Step towards Financial Freedom

Introduction
Are you one of the many who are trapped by debt and desperately looking for financial freedom? With some easy-to-follow strategies, debt management can be the key to being debt free forever.

Debt Scenario
The debt situation is very serious in all corners of the world today. Even powerful countries like the US and UK haven’t escaped from the trap of debt. Monthly bills, credit card interest, mortgage loans, educational loans, medical expenses – the list of the various forms of debt is endless. With so many bills to pay off, it’s not unusual to lose track of debt payments. But with an effective debt management solution, you won’t have to worry about anything.

A Debt Management Secret
According to debt management analysts, a little debt is not so bad. In fact, it can turn out to be profitable for you. Sound contradictory? Well, not really. A home equity loan can be a good option for achieving income tax balance. Also you can consistently pay off your creditors if your debt amount is less, and it will build a good credit rating for you. Based on your rating, you can also obtain other loans with lower interest rates.

Debt Management Keys to Breaking the Cycle of Debt

Curb High-Cost Debt
Debt management strategists often suggest paying off your highest interest credit card balance first. But don’t stop your lower interest debt payments, rather continue with the minimum payments. Once the higher interest debts are paid off, you can work on the balances of your other debts.

Maximize the Usage of Debt Consolidation
Debt consolidation is a good option for paying off debt. Debt management experts suggest a number of ways in which to speed up your debt payment proceedings. Some prominent strategies are:Balance transfer from high interest credit card to low interest credit card. However, it is advisable to have a clear understanding about the transfer fees before choosing the option or you could end up paying more than the initial credit card payoff. Home equity loans offer low interest rates, and there is also a tax deduction provision. Hence, it’s a good debt management strategy to opt for a consolidation loan.

Avoid Sacrificing Retirement Savings
Retirement saving is a wise plan for saving for the future. Even though debt payment should be your highest priority, debt management analysts recommend it shouldn’t be at the sacrifice of your retirement savings.

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