What You Should Know About Debt Settlement Organizations

Debt settlement is something you hear more about now that the economy is not what it used to be. Most of these companies advertise that you can be out of debt in 3 years or less and that you can save a large percentage of what you actually owe on your credit cards. debt consolidation loans

This is true, but if you think it is as easy as sounds, you are going to be surprised. Debt settlement reduces the total amount that is owed on your accounts through a negotiation process with the lender. You will end up only repaying a portion of what was originally charged on the account. This may all sound very appealing to you, but there is a down side and many of these organizations do not go out of their way to make these negative aspects clear. debt consolidation loans

The first thing you must understand is that this type of debt relief will negatively impact your credit. Anytime you are not paying back 100% of what you borrowed, it will not look good on your credit report. Many people that opt for debt settlement probably already have trashed credit, but if your accounts are current, credit counseling is probably going to work better as a debt relief alternative. debt consolidation loans

Issue number two is the taxes you will be expected to pay on the amount that is written off on your account. If your original amount due was $2,000 and the lender settled with you for $1,000, you will receive a 1099 showing the other $1,000 as income. If you borrow and it is forgiven, the government views it as income and they want their fair share. debt consolidation loans

If you do not have a problem with credit score going down or paying taxes on the amount of debt that your lenders write off, this may be the debt elimination alternative for you. It can have you out of debt in less time than most other options, but there are things you have to consider before enrolling in this type of debt management plan.