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Considering a Debt Settlement program?
Learn how to settle your own debt, instead.
If you’re one of the millions of Americans struggling with debt, you may have heard about 3rd party ‘Debt Relief’ programs that can settle your debt for less than you owe.
You may also be aware that you can settle your own debt and save yourself from paying 3rd party fees – Debt Settlement Explained is here to show you how.
100% Free Educational Information.
Why Settling Your Own Debt is Best.
There are several benefits of choosing to settle your own debt, as opposed to hiring a 3rd party Debt Settlement (i.e., Debt Relief / Debt Resolution).
You will automatically save the time & money you would be spending paying a 3rd-party company’s fee for a service that you could easily do yourself.
However, the real benefit of settling your own debt is the fact that you have a higher chance to succeed compared to a 3rd party program.
By maintaining clear communication with your creditors, not only does it buy you more time to save money, but it also helps creditors avoid becoming unnecessarily aggressive.
Why Debt Settlement Programs are Flawed.
The simple reason why 3rd party Debt Settlement / Debt Resolution programs have such a high rate of failure is because of the excessive fees they charge.
On average, most Debt Settlement companies will charge between 18-25% of the enrolled debt amount as their own service fee.
Part of the industry’s regulations means that they can only take their fee when they’ve actually settled an account – however, there is a loophole:
Most Debt Settlement programs charge their service fee on a per account basis, meaning that they get more of their service fee the larger the balance.
For example: At an industry average of 25%, the service fee for a $10,000 credit card would be: $2,500 vs. for a $5,000 credit card: $1,250.
This means that these programs can prioritize the largest accounts first in order to get the largest amount of their service fee early on. This also means that your monthly payments are now tied up towards the program’s service fees (usually paid first) and then towards the largest balance account you have through a payment plan which may last years.
In many cases, having the monthly payments tied up paying off the settlement, as well as the associated service fees, usually means not having enough funds to pay off your other debts owed to oher creditors – resulting in lawsuits to the point of bankruptcy in many cases. Additionally, most Debt Settlement companies also do not properly (or do not at all) account for the increase in balances due to interest/late fees.
What is Debt Settlement?
Debt Settlement is the process of negotiating with your creditors to satisfy your debts at a lower amount than you owe.
Creditors often will prefer to settle debt since they make significantly more money in the long run, due to the accruing amount of interest we pay as we use credit.
What are Debt Settlement programs?
Debt Settlement (also advertised as ‘Debt Relief’ or ‘Debt Forgiveness’) programs are services offered by 3rd-party, privately-owned companies that will negotiate your debt (i.e., settle) the debt for you.
These programs cost money (service fees are between 18-25% of the enrolled debt) and often, for that reason, will fail due to not having enough funds available to pay off the debts themselves.
Does Debt Settlement Explained cost money?
No – the exact opposite. Everything explained on this website is strictly for educational purposes. We do not offer any paid services.
Debt Settlement Explained was established solely to spread consumer-awareness and help people out of debt.
Do you offer free advice?
Yes – All advice & information is free. You can describe your situation, as well as your specific questions, using the following link.
Why do 3rd-party programs fail?
3rd-party programs fail primarily due to two (2) main factors:
1) The initial estimates for those programs are inherently flawed, as they do not take into account the increased balances of the debts owed due to late-fees & interest.
2) Due to the 3rd-party company’s fees, there is typically not enough projected savings to actually settle the debt, especially taking into account the previous factor of flawed estimates.
Is settling my own debt risky?
Yes – there are no guarantees when it comes to getting out of debt. A large part of our struggle to get out of debt is due to circumstances beyond our control.
That said, settling your own debt vs. using a program has tremendous advantages and will typically only increase your chances of success.
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How will creditors react if I try to settle?
Creditors will always prefer debts be paid in full – however, creditors also know that, in the long run, they are collecting a significant amount of money on interest and fees.
Therefore, creditors factor the possibility that consumers may have to settle their debts at one point or another. They would rather have some money, at least, rather than push finances to the breaking point and risk receiving nothing.
On a side note, it is important to state that creditors do become more aggressive when hiring a debt settlement company vs. contacting them yourself to settle your debts. Hiring a 3rd-party company to settle your debts shows creditors you are more willing to pay someone else than your original debt, and therefore is taken as a hostile action, in most cases.
Need some help? Have a question and didn’t see an answer?
Figuring out the best way out of debt can easily be overwhelming, especially if there’s no one around to ask for advice.
We’re here to help you understand all your options, so you can determine the right path for you to be debt-free.
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About Us
Debt Settlement Explained is a website dedicated to helping spread free information about Debt Settlement.
Established by former Debt Specialists, our mission is to encourage more transparency within the Debt Settlement industry.
There are numerous privately owned companies that rely on manipulative & dishonest sales tactics; we are here to expose these flaws within the industry.
The FTC estimates that roughly half of Debt Settlement clients successfully graduate.
Learn why these programs fail and why you have a better chance at becoming debt-free on your own – without 3rd party help.
In addition, you can also learn how to use the same tactics that the top Debt Relief companies use, but customizing them so they actually work for your specific situation, while avoiding unnecessary fees.