Debt settlement is often promoted as the most ideal financial solution during financial crisis. However, in the actual fact, this financial option may be harmful. Let’s take a look at the following risks. The information stated below will not be informed by the settlement companies to their potential clients.
First thing first, you are reminded to consider the risk of getting bad credit score. Many service providers inform their clients that this kind of settlement plan will definitely not hurt your credit rating. However, in reality, the process makes your credit worse than before. The moment when you stop making payment to your creditors, your creditworthiness has been affected in the eyes of the lenders. When you fail to make minimum payments to your accounts, your creditors usually give you bad marks on your credit report.
When you complete your settlement process, again, you face another risk. Your creditors may not report your debt as “paid in full”. They will report it as “paid as agreed” or “settled”. By having these statements on your credit report will affect your trustworthiness in the eyes of your new lenders in the future. You may face difficulty in obtaining new loan.
The whole settlement process is indeed stressful. When you stop making payment, you will be receiving all sorts of calls from your creditors chasing you for payment. Some calls are harassing and irritating. Having non stop phone calls will definitely affect your work and your life. You may face the risk of having bad “reputation” when the creditors call to your work place to look for you.
To sum up, debt reduction will cause negative impact to your credit score and it will ruin your financial situation if your debt is not managed properly. Hence, you are advised to do more research about this financial solution before making your decision.