Debt Settlement – The Advantages and Disadvantages of Applying For It

If you have done enough research on the various options available for people to settle their debts, you would know that typically there are three options that they can choose from. The first one is credit counseling program, second is debt settlement, and the last one is filing for bankruptcy. Of all the three options, debt settlement is the most popular choice among those who want to get rid of their debts. However, this option might only work for some, and not for others. This article would show you the advantages and disadvantages of this method.


1. Debtor only needs to pay creditor a small amount from what the debtor actually owes. Usually, the saving is around 40 to 60 percent from the total outstanding amount.

2. It is more hassle-free compared to bankruptcy. A bankruptcy filing would involve more legal procedures and takes longer time to complete.

3. The debtor has the option to negotiate with the creditors by himself, which would save on the fees if a debt settlement company is engaged.

4. This method would result in a single payment to be made to the creditor. Of course this would mean that there would be no more bills and calls from the creditor. This would certainly reduce or eliminate the stress from your daily life.


1. A debt settlement would affect your credit score.

2. If you are able to save more than $600 as a result of the negotiation, the saving is subject to tax.

3. Your debt would be marked as ‘pay by settlement’ instead of paid in full in your credit report. This would certainly affect your application for loans in the future.

4. Some of the creditors might be unwilling to negotiate with you to lower your debt amount. Instead, they might start to treat you more ruthlessly.

Given the list of pros and cons above, the pros usually wins as debt settlement provides you with the option of settling your debts with an amount that is within your means. However, do take note that this option is only for those who are unable to pay their debts regularly. For more information about debt settlement program and debt settlement online, visit