Things Debt Settlement Companies Don't Tell You</p>

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5 Things Debt Settlement Companies Don't Tell You

Once you start falling behind on your credit card payments, it's hard to catch up. So most people start looking for professional help. Debt settlement is one of your options. Done right, it can help you avoid bankruptcy and get out of credit card debt quickly. But debt settlement companies don't always tell you everything you need to know.

Sure, you can settle your debts for less than you owe. But it's not always that simple. You need to know all the facts before you decide on debt settlement as your best option. Here are 5 things debt settlement companies don't always tell you:

Debt consolidation is not the same as debt settlement. Settling your debts is a much more aggressive approach, and is not right for everyone. Typically, if you are paying on time and have the money to pay your bills, debt consolidation (or credit counseling) is the right option. Otherwise, getting yourself into position to reach a settlement can be very stressful. Because...
You must stop paying your credit card bills if you're not already behind in your payments. Many people don't understand this part of the process. They often think that the credit card companies will just let anyone pay less than they owe. Not true. If you are paying on time, you must stop paying and then prepare for the consequences - threatening phone calls, late fees, having your credit card purchases declined, etc.
You must wait for enough money to be saved in order for a settlement to be reached. In order to settle, you must pay a lump sum to your creditors. So unless you have money already saved for this purpose, you must start saving. Some debt settlement companies will help you set up a payment plan, put the money into a separate account, and wait until you have enough money saved up to pay off the agreed amount. If your bills are high, this could take a while.
Debt settlement will hurt your credit. The settlement companies will tell you they'll try to get your account listed as "paid in full". However, this rarely happens. Simply because you didn't pay in full. So your account will usually be marked as "paid for less than full balance". And you'll have all the late payments listed too. Both of these will lower your credit score.
At the end, you must pay taxes on the money you saved. For example, if you start with a $10,000 balance, and agree to settle it for $6,000, you'll pay tax on the $4,000 you saved. But keep in mind that this will still probably save you money in the long run, since you will no longer be paying high interest rates or credit card fees.

If you're considering debt settlement or credit counseling, it's good to know the truth.

But don't be discouraged. Despite the 5 points above, for many people settlement is still a much better option than paying the high interest rates, silly credit card fees, and being stuck in debt forever!