Debt Resolution Pros and Cons: A Deep Dive
Clarity Debt Resolution Inc
At Clarity, we put you in charge of your own second chance.
When it comes to finances, especially managing debt, swimming through all the information available can be overwhelming. Each one promises to be the solution to your financial problems. Among them, debt resolution is a promising strategy worth considering.?If you have ever wondered, “Is debt resolution a good idea?” this article is for you. For a strong understanding, we’ll cover debt resolution pros and cons, offering a balanced view to help you make an informed choice.
Whether you’re tackling debt as part of a new financial plan (new year’s resolutions, eh?) or are just hearing about debt resolution for the first time, understanding this strategy will provide clarity and help you take steps toward regaining control of your finances. By educating yourself on all available options, you can feel more empowered to make decisions that align with your long-term financial goals.?
A quick overview of debt resolution
The best way to understand something is through its basics. Debt resolution is a negotiation process where a creditor agrees to accept a reduced payment of less than the initial amount owed. Once agreed, this smaller amount is either paid off in full through a payment plan or in a lump sum to settle the account.??
During negotiations, creditors weigh several factors when deciding on an acceptable amount. On average, they can negotiate about 50%. The process also involves negotiating payment terms to make settling the debt affordable.?
Creditors may be open to settling debts but prefer to recover as much as possible. As such, accounts must meet specific criteria to qualify for settlement, typically at least 90 days (about three months, some up to six months) past due. Fortunately, this means it is possible to resolve debts.?
What else should I know going into this??
Besides the above, it is important to know there are other options, and each one’s benefits differ depending on what your situation calls for.??
Debt resolution differs from debt consolidation or bankruptcy by directly negotiating with creditors to reduce the debt amount owed. While debt consolidation involves taking out a new loan to pay off existing debts, debt resolution involves settling the debt for a lower amount. Unlike bankruptcy, which discharges debts but severely affects your credit, debt resolution offers a partial settlement and avoids long-term credit damage.?
If you want to learn more about other kinds of debt relief, we have an article covering the differences between debt resolution and debt consolidation in greater detail.
Why debt resolution pros and cons??
Settling your debt can save you future financial headaches, but it is important to figure out if debt resolution is best for you. So, to answer why, because knowledge is power, and information empowers. The better journeys come when you are fully equipped to approach them.
No matter what route you take, a clear understanding is always reassuring. Now that we’ve covered the fundamentals, here are a few debt resolution pros and cons to take into consideration: