Almost everyone finds themselves in debt eventually and, when you do, asking for help is a good idea. Believe it or not, being unable to pay your debt off immediately doesn’t mean you’re destined to run from creditors the rest of your life. There may not be a pot of gold at the end of the rainbow, but the yellow brick road of financial freedom is shining with possibilities. You just need to know what those possibilities are.

What is debt settlement?

Debt settlement is a debt relief strategy that helps you pay your creditors off in a manner that fits your finances. By letting your creditors know you are having a financial hardship, you are giving them impetus to release some of that debt – usually in the form of forgiving or reducing a percentage of your current balance.

How does debt settlement work?

When you start a debt settlement service or program, any monies that you might use to pay off your creditors goes into a bank account. During that time, while the bank account is growing, your debt relief representatives will be letting your creditors know that you are experiencing financial hardship and are unable to pay your bill in full. They will also be negotiating with those creditors to settle on a fixed payment amount (which is why it’s called debt “settlement”).

How it works for you is that the monthly amount you pay into the bank account is affordable. It’s adapted to fit your income level, so you don’t struggle to meet your payments.

Does debt settlement affect my credit?

Yes, debt settlement services will affect your credit. Depending on the number of creditors and your current credit score, it can affect your score. However, when you can’t afford even the minimum monthly payments, debt settlement is the next best thing to a trampoline. It helps you get caught up on your debts and, eventually, can return you to a better credit standing.