Debt Settlement Pros and Cons

An Honest Look at Debt Settlement Pros and Cons

Managing debt can feel overwhelming, but you have options. Debt settlement with Century Support Services is a powerful strategy for those struggling to keep up with unsecured debts, such as credit card balances. While it isn't the right choice for everyone, it is the fastest and most cost-effective way for many to regain financial stability without declaring bankruptcy.

Our goal is to help you resolve your debt for significantly less than the total balance. If you're experiencing financial hardship and can no longer afford your monthly payments, our team is here to negotiate on your behalf.

How Does Debt Settlement Work?

When you work with a debt settlement company, debt specialists will review your situation to see if you qualify for the program and then discuss an affordable plan for your budget. From the beginning, you’ll make monthly deposits in an amount you agree to into an FDIC-insured savings account in your name, instead of paying creditors. You deposit funds over several months, anywhere from 18-48 months or more, and when a large sum has accrued, the debt settlement company will negotiate your current debt to a lower sum. If you approve the negotiated amount, you'll use funds from your savings account to pay the settlement and the debt negotiator company's fee. So, what are the pros and cons of debt settlement?

How Century’s Program Works

Benefits of Debt Settlement

Here are the major advantages of choosing this route for debt relief:

Significant Savings - Settlement is the only option that actually reduces how much debt you’re responsible for paying without filing for bankruptcy. Not only will your debt be reduced, but the interest that would compound on a higher balance will be lower as well.
No Upfront Fees - You're not responsible for paying any debt settlement fee to your negotiators until a successful settlement that you approve has been finalized. There’s little risk in exploring the possibility.
Professional Negotiation - Certified Debt Specialists like ours have years of experience working with lenders and creditors to understand what they’re likely to settle for, removing the burden and stress from you.

Important Considerations Before Debt Settlement

Our goal is to help you settle debts, but to ensure you have the best experience, it's essential to consider why it might not be the best solution for you:

Eligibility Requirements - You must meet specific criteria to be eligible for a program like ours. Creditors and lenders aren’t willing to settle debts with just anyone.
Only Unsecured Debts Qualify - Unsecured debts aren’t tied to any form of collateral. Settlement is only available to resolve debts on things like credit cards, retail charge cards, or personal loans (excluding mortgages, auto loans, student loans, etc.).
Credit Score Impact - Since you’ll stop paying creditors to put money in a savings account instead, your credit score will naturally drop. However, if you’re seeking debt settlement, you’re likely having a hard time making payments, which will also lower your score even without debt relief assistance.
Tax Implications - The amount of money forgiven or settled with creditors can be viewed as taxable income. This can increase your tax liability for the applicable tax year.

Who Qualifies for Debt Settlement?

Creditors are businesses, and they need a financial incentive to settle. If you have a lower balance and a perfect history of making payments, lenders have no reason to accept less than what is owed. However, if they see that you’re in a hardship situation where the alternative might be bankruptcy, where they get nothing, a settlement becomes more appealing. To ensure the best possible outcome, these are the general qualifications of a good candidate for debt settlement:

Over $10,000 in unsecured debt
Experiencing a verifiable financial hardship, such as job loss, medical issues, or divorce
Inability to pay anything more than the monthly minimum, or have already started missing payments

Comparing Debt Relief Options

Whether you don't qualify for debt settlement or you're just wondering how it differs from other options, these are other common paths for debt resolution:

Credit Counseling - This usually involves a Debt Management Plan (DMP) where you pay back the full principal amount, sometimes with lower interest rates. It’s a good option to help with interest charges, but it doesn't reduce your principal balance.
Consolidation Loans - Taking a new loan to pay off existing debts can be attractive because it simplifies payments. It requires a good credit score to qualify for a new loan with lower rates, and it doesn't reduce the principal.
Balance Transfers - Transferring high-interest debt to a card with a 0% introductory APR can save money on interest. However, this often requires excellent credit and may involve transfer fees. The catch is that if you don’t pay it off before the period ends, interest rates can skyrocket.
Bankruptcy - This legal process can discharge some or all of your debts. It offers a fresh start but has the most severe and long-lasting negative impact on your credit report and public record.

How to Get Started With Debt Settlement

High unsecured debt affects consumers of all ages and backgrounds from coast to coast. If you’re one of the millions of U.S. citizens looking for an effective way to resolve debt, debt settlement could be an option. First, consider your situation. Do you match any of the criteria above, such as unsecured debt surpassing $10,000 and a history or potential of late or missed payments? Next, find a reputable debt settlement company like Century Support Services that has experience and accreditation from debt and consumer protection agencies. Remember, every situation is unique, so even if you think you don’t check off all the boxes, it’s still a good idea to speak with one of our Debt Specialists for a free consultation. You won’t know for sure until a professional reviews your financial situation. If you qualify, a Certified Debt Specialist will help you develop a customized plan that you approve to settle your debt. Scams and illegitimate companies are out there trying to take advantage of desperate consumers. Red flags of companies to avoid include:

Promises to eliminate all of your debt
Requirements to pay any fees before debts have been settled
Offers to take advantage of “a government program” to get out of debt
Guarantees of paying pennies on the dollar to resolve debt

Real People, Real Progress

Our company has helped more than 300,000 clients settle over $2 billion of debt. Our customer satisfaction ratings on Trustpilot, Google, and Consumer Affairs are proof that our Certified Debt Specialists and their relationships with creditors are an effective solution to bring financial stability to people all over the U.S. Our SmartTrack™ program includes support from real people, 24/7 insight into your progress, and the motivation to stay on track to meet financial goals.

Frequently Asked Questions

: Yes, once your debts are settled, you'll be able to rebuild your score. With a lower or zero balance, your debt-to-income ratio improves, which is a key factor in credit scoring. Responsible financial habits and monitoring your credit activity are critical to rebuilding your credit over time.

: Yes, you can attempt to negotiate with creditors yourself. However, it can be a stressful, time-consuming process. Creditors have teams of professionals trained to collect as much money as possible. Our experienced negotiators know the ins and outs of the industry and have established relationships with creditors, which often allows us to achieve better results than individuals can on their own.

: When you look at debt like a mortgage or an auto loan, those are secured by collateral (a house or a car). Unsecured debt is any debt that’s not backed by collateral. This means if you default, the creditor doesn’t have property to seize for non-payment. Common examples include credit cards, medical bills, department store cards, and unsecured personal loans.

: Creditors prefer to get something rather than nothing of what is owed. When an individual has more debt than they can afford to pay and a pattern of missed or late payments, creditors realize the borrower might be facing bankruptcy, where all debts are cleared. In settlement, creditors can at least recoup part of what they’re owed.

Consult With a Certified Debt Specialist

Now that you have a better idea of the pros and cons of debt settlement, Century Support Services can help determine if you’re a qualified candidate for our program. Contact us today to speak with a Certified Debt Specialist. During our free consultation, we’ll learn about your financial situation, discuss any hardships, and determine the best path to provide debt relief.