The overwhelming debts have taken a toll on your financial situation. You might be looking for a debt relief program that would help to reduce your debts. If you are keen to lower your outstanding balance as well as the interest rate then try to enroll with a debt settlement program. But before you enlist for the service make sure that you are aware of the advantages as well as the disadvantages of the debt settlement program. This would help you to take right decision in order to secure your future.

Pros of a Debt Settlement Program:

  1. Once you enroll with a debt settlement program you can reduce your debt up to 50% of the outstanding amount. You have to start repaying the creditor on the amount that has been negotiated on. The debt settlement program helps to make the repayment plan affordable for your pocket.
  2. If you enroll with a debt settlement service it helps to negotiate your unsecured debt much faster. You can repay your debt within 3 years and liberate yourself from the clutches of debt.
  3. You can avoid the harassing calls of the creditors the moment you take up the settlement program. As the creditors hope to retrieve the amount that he has lent therefore he would stop harassing you. You would also get the guidance of a proficient settler and guide you in time of financial crisis.
  4. The impact of debt settlement on your credit report is not as severe as filing bankruptcy. Therefore if you are interested to get rid of loan then you can look forward to debt settlement as an alternative to bankruptcy.

Cons of a Debt Settlement Program:

  1. Debt settlement involves a monthly repayment plan that a debtor needs to pay off through his income. If you do not have a stable income then it is not possible to get rid of your existing debts.
  2. If you plan to enroll with a debt settlement program then you need to miss your payment for a long time. If you default on your account then it might have an adverse effect on your credit report. This might create impediment while you plan to take up another loan in future.
  3. The settlement program might help to negotiate and save money but it would come under your taxable income. Therefore the amount you save after enrolling with a debt settlement program would be taxed. So, it is one of the factors that you need to consider before choosing a debt settlement program.
  4. The debt settlement companies often do not reveal the upfront fee in the beginning of the program. But with the progress of the settlement they disclose the hidden cost that might be quite expensive for your pocket. Therefore it is one of the crucial points that a debtor should know before he enlists for a settlement program.

These few pros and cons of this program would help you to consider whether you would take the debt settlement program or not.

Author's Bio: 

This article is contributed by Catherine Woodward, a Financial Writer associated with We Redefine.