Many people get into financial difficulties at any time and are unable to pay off their loans and credit card bills on time. If a person losses his job, meets with an accident or becomes seriously ill, he will not be able to look after his finances as he used to do. Debt settlement can be one of the options because you may end up paying a lower amount than what you actually owe. It is also a good idea to get in touch with a Chicago debt collection defense attorney because he can help you with the best debt settlement option.
Risks of debt settlement
If you are planning to settle your debt with your creditor, it is important to know its potential risks. Some of them are explained below:
You will still have to pay a huge amount
Many people start to believe the words told by the debt settlement companies that they would pay a penny for a dollar. While debt settlement gives an opportunity to reduce the debt, you still need to pay a hefty amount. You must bear in mind that you need cash in hand to pay off the settlement amount.
Debt settlement hurts your credit scores
It is vital to understand that your credit score will suffer for about seven years because the creditor will report to agencies about the settlement. The status will reflect in your credit history. Therefore, you must look for other options as well so that you get rid of your debts and get healthy credit history in the end. It is a good idea to consult a debt collection lawyer or financial advisor.
Negotiation may be hard for you
If you try to negotiate with the creditor yourself, you will not be able to get the desired results. That’s why, it is strongly recommended to get in touch with a lawyer. He will negotiate with the lending company or debt collector on your behalf and ensure that the best deal is closed. You are not aware of the laws pertaining to consumers and hence, may need to spend money to hire an attorney.
Old debts are difficult to settle
The creditor may not want to settle if your debt is very old. He may not agree to the terms and conditions and will ask you to pay off the entire amount.
Depending on your situation, you should make the right decision to live a debt-free life.