Is debt settlement a good idea? Learn about how debt settlement works, and the pros and cons.

You're swimming in debt and you can't imagine that you will ever be free of it. Do you turn to debt settlement? The idea of debt settlement is that you pay a company to help negotiate with your creditors to accept less than you owe so that you can get out from under the debt. The question is, is debt settlement a good idea? Absolutely, debt settlement is a great idea. I completely disagree. I think debt settlement is a terrible idea. Are you kidding me? One of the best things about debt settlement is that it gets the debt off your mind. You can think about something else in your life knowing that you have a company that will worry about it for you. I can't tell you how the weight will lift off your shoulders when you know that you are no longer alone in figuring out how to deal with all that debt. I can see that. But you do realize that the debt doesn't actually go anywhere, right? In fact, you are still likely to get bugged by your creditors and ultimately, it may seem like you can breathe, but you really aren't sure when the debt will be resolved, if it will be resolved, and how much it will cost you. You trade a little bit of short-term peace in mind for a long-term uncertainty. That peace of mind is valuable. It might give you just enough emotional space to allow you to be a more patient parent, a more attentive spouse, or just find a little zen in your life, maybe. But that stress will return when you learn the debt settlement process will absolutely, completely, and undeniably trash your credit score. You won't be able to buy a house for years, and if you do try to finance a car, you'll get the worst rates. It could take you years to rebuild. What kind of stress will you feel when you are trapped in a poor credit score, especially if you are used to having a credit score above 670? It'll be a shock. Yeah, but what if I already have a poor or a bad credit score? I'm not really giving up anything, am I? I am already in a situation where it could take me years to rebuild my credit score. Perhaps the thing to remember is that nobody escapes debt settlement with their credit score intact. No one. And one of the things I love about debt settlement is that it can provide immediate relief to my monthly budget. Before debt settlement, every free dollar in my monthly budget was going towards servicing my debt. Not only was I not making progress paying off my debt, I wasn't even able to survive. I can't tell you how many times I put off a dental appointment or a car maintenance because I didn't have the money. The debt settlement process can give you some of that immediate relief. But remember that the more relief it gives you right now, the longer the process will take. You see, the debt settlement company can't begin to negotiate until you've amassed enough money to pay a chunk to your creditors and pay the debt settlement fee, which is not an insignificant amount, by the way. The longer it takes to build up that account, the longer the process will drag on. But the debt settlement company doesn't get paid unless they settle the debt. Debt settlement companies are prohibited from charging any fees or receiving payment until they have successfully negotiated or settle at least one of the consumer's debts. They have an incentive to get the job done. That's true, mostly. There might be some companies that will charge an account maintenance fee, but you are right that they won't get their real fee until they discharge the debt. But that's a big fee. Most companies will charge between 20 and 25% of the total amount of debt. They charge you that fee even when they don't drop your debt very much. Some companies will decrease their fee if they don't drop your debt enough for you to save any money, and some will charge you anyway. It is possible that the debt settlement company could negotiate your debt down 25% and then charge you 25% as a fee. You end up paying the whole thing anyway, but you aren't paying interest at that point either, so you're probably still saving something. But remember that the IRS considers forgiven debt income, so you will need to pay income taxes on whatever is forgiven, even if the debt settlement company takes all of the savings. But if you really can't see your way through your debt though, debt settlement is probably a vast improvement over bankruptcy. When you go through bankruptcy, it still trashes your credit, and it takes a long time, and you have to hire a lawyer. You probably could see your way through debt settlement faster, easier, and cleaner than going straight to bankruptcy, but you could have legal fees in the debt settlement process too. The idea of debt settlement is that you're under financial duress, and you aren't able to get through. If a creditor thinks your situation really isn't as bad as all that, they may refuse to negotiate with you. And if you still won't pay, it's common that they will sue you, and at that point, you'll still have to hire a lawyer. If you don't, you could just have a summary judgment against you. That doesn't happen all the time. It's not uncommon though. You've got an awful lot of negative things to say. What would you do if not debt settlement? Well, you could do debt settlement on your own, actually, by negotiating directly with your creditors. At least that would save you the big fee, and use that money to pay off your creditors. Maybe the process would even be faster. Yeah, but that's a huge headache, even if you could figure it out on your own. The other thing I would do before I did debt settlement is to see if I could solve my problem with a debt consolidation loan. If I can get a debt consolidation loan that saves me on interest, I could pay the debt off faster and get out of debt with my credit intact. If someone would even lend you the money. Well, that's true. You need to shop around so that you can make sure to get the best deal that you can get. At the Yukon Project, we go out of our way to make sure that shopping is easy. You can go to our marketplace page and select debt consolidation and apply to any one of our featured lenders. Behind the scenes, we will check your rate with up to 40 other lenders. Our partners use a soft credit check, so applying won't hurt your credit score. We will show you all of the approved offers so that you could pick the one that's best for you. And what if you aren't approved for any of them? That can happen. Our partners can then talk to you about your other options for debt settlement. If you really want to go that route, we can help you do that. We think it's important to give you all of the options that we can. So what you're saying is that you agree that debt settlement is a great idea. We'll just have to agree to disagree. If you have any experience with debt settlement, leave a comment below and let us know whether you agree with me or with me on whether it's a good idea. We're trying to build a community of people that can share their experiences so that we can all make better decisions about our personal finances. If you found this information helpful, please like this video, share it with someone who could benefit from it, and subscribe to our channel. Your support helps us out and we really appreciate it. Thanks for watching.