Understandably, American consumers are now scrambling for every available means of maintaining their finances. A large debt is a huge drain on the monthly income and is therefore something which should be settled as quickly as possible. Skipping on debt payment is an option and, indeed many consumers carrying debts too big to handle are opting for it. However, in the long run, it is a disastrous solution. The best way to get rid of debt is to pay it off. The problem is that, in the current economy, paying off debts can drain away all of a month's pay.
This is why debt settlement is a fast becoming popular way of getting out of debt. The popularity of debt settlement is caused in a big way by the high growth of debt settlement companies. Debt settlement companies are financial entities which try to entice debt laden credit card holders by promising to settle their debts for a fraction of the original amount. These companies often make it sound as if debt settlement is an easy and safe way to settle your debts. Unfortunately, nothing could be further from the truth.
Debt settlement is a risky affair. If you use a debt settlement company, there is a large probability that you will get worse off than you were originally. Debt settlement companies also offer a service which you can very well do on your own without having to pay large fees.
While debt settlement companies are risky, debt settlement itself is also something that no one should take lightly. True, because of the economic crisis, credit card companies are more than willing to settle for a lower amount in order to forgive a debt. However, when a credit card company does this, they are likely to stop trusting you as a borrower.
The biggest blow that you'll get when you go for a debt settlement is in your credit score. Your credit score shows how good of a borrower you are. When you get loans, your credit score is usually the first thing that a creditor will check. A low credit score will lower your chances of getting the loan approved. This is why the effect of a debt settlement agreement can be very dangerous for you. Debt settlement will put a black mark on your credit score which will stay there for seven years. It will have a huge negative effect on your score so that you will find it difficult to secure a loan in the future.
To avoid ruining your credit score, review every available solution first before you settle on debt settlement. There are many credit counseling groups which can help you do this. It is important to inform yourself first before you make a decision.