There are various debt relief options like debt consolidation, debt settlement, credit counselling, various secured low interest loans, bankruptcy etc. available to debtors. The best among these is debt settlement. In this debt relief option, the debt settlement company negotiates with the creditors for a lenient repayment option. Thereby it attempts to reduce the debt burden on the debtors.

How Debt Settlement Helps

A debt settlement company negotiates with the creditors to reduce the amount of money owed by the debtors. Subsequently the debtor has to pay only a small percentage of the loan back. A good debt settlement company can negotiate for a 40 percent to 60 percent reduction of the outstanding amount. The debtor can pay off the loan in two ways. He can make lump sum payment for the reduced amount and clear off the debt in one go. Or else he can opt of a payment plan. The debt settlement company can devise a payment plan for the debtor which will help him become debt free in a few months. The debtor with the help of debt settlement becomes debt free sooner than in any other debt relief options available to him.

Debt settlement is available to those debtors who are facing impending bankruptcy. With this debt relief option, the debtor is able to salvage the situation without resorting to bankruptcy.

Comparison With Other Debt Relief Options

1. Debt Settlement Vs. Debt Consolidation: In debt consolidation, the debtor has to pay back the entire money owned by him. It is just exchanging many loans for one. The debt amount remains the same.

2. Other Secured Loans: The debtor is in the debt because he is not in a position to pay what he has borrowed. If he takes a secured loan, even though on a lesser interest rate, he will be risking the collateral if he cannot pay back the secured loan.

3. Bankruptcy: This will destroy the credit standing of the debtor in the market. He will find it difficult to raise new loans, rent a house and even find a job with his bad credit rating.

4. Credit Counseling: With this only the interest and late payment fee is reduced not the principal amount.

Debt settlement provides a midway between all these debt relief options. Hence, it is a better option.

A Word Of Caution

1. Do thorough research before settling for a particular debt settlement company. Go for that company that has a proven record. Such a company will be able to negotiate for a better deal.

2. Know upfront what the debt settlement company is charging fro its services. Some companies charge a percentage of the debt you owe or a percentage of the money they have saved you. Ensure that you get your moneys worth.