It’s bad enough to be drowning in debt and clawing for a way out of the mess. The last thing you need is people around you offering you bad advice, an
It’s bad enough to be drowning in debt and clawing for a way out of the mess. The last thing you need is people around you offering you bad advice, and there’s a lot of it surrounding debt settlement. Your payments well exceed your income after necessary expenses. Your stress levels are through the roof. So you ask for help and someone tells you a load of misconceptions which makes the situation seem inescapable.
But it’s not inescapable. Thousands of people go through debt settlement monthly and they aren’t the ones perpetuating the myths. They’re happy to be free of the pangs of compounding interest charges. Of course the way to dodge any problems is to only work with the best debt settlement companies around, but you have to get to that point by fighting through the muck of hearsay from people who’ve never been through the battle.
Here are four of the biggest myths you’ll hear surrounding this issue, along with the truth of the matter:
Your Credit Score is Damaged Forever
No. This is not true, and I’m hearing a collective sigh of relief from all of the readers out there. The truth is that settling your debts will affect your credit score negatively. Of course it will, but nothing can put a permanent dent in your score. You can always bounce back with dedicated and patient work.
While your score can be improved, there will be a record of your settled debt on your sheet forever. This is where this myth comes from, because it can make obtaining new loans problematic. But you’re probably not likely to be hunting down new loans any time soon, and with time passed it won’t be as much of an issue.
Everyone’s Doing It
People talk very casually about debt settlement like you can just roll down to a company’s office and get it done in an afternoon. But the truth is that it’s a complicated venture that only a fraction of people are qualified for in the first place. The two main qualifiers are that your debts exceed your non-necessity based income and that you have to be able to afford to settle the debt.
That sounds absurd because the two qualifications seemingly contradict one another. But the reality is that your settlement will be smaller than your full debts and interest. That is the compromise your creditors will make to ensure they get paid back at all, because you might declare bankruptcy instead.
You Can DIY Debt Settlement
You can’t do it yourself. There are some processes involving debt that you can deal with yourself like consolidation but in order to achieve a settlement you have to use a debt management agency. The difference is that you’re in much more dire straits here and creditors have learned to only deal with people who have leverage and an investment from you. Let them do the negotiations, because they can actually get someone to pick up the phone whereas you’ll get stonewalled.
Borrow From Peter to Pay Paul
Do not, I repeat, do not fall for balance transfer schemes. Yes, you can take out a 12-month no-interest credit card to pay off your higher interest loans. Good for you, except when month 12 rolls by, you’re going to have a new payment to default on thanks to the obscene interest rates that’ll be attached. This isn’t even to mention the fees associated with this transfer and the ding you’ll take on your credit score.
Yes, creditors will sell your debt to a third party. They have all of the leverage and money in the world. You have the exact opposite, so please don’t play hot shot with your debt. It is a mistake that will ruin you for an even longer period of time.