Costs of Debt Settlement
If you are struggling with debts that you cannot afford to pay, you need to start looking into debt relief options, like debt settlement.
However, many people worry about the cost of debt settlement and when you are already in a difficult financial position, adding more costs for debt relief is the last thing that you want to do.
But it’s important to remember that, even though you will incur costs, debt relief can help you to finally start making progress with your debt repayments.
When calculating the cost of debt settlement, there are a few ways to look at it; you need to consider the cost of entering debt settlement compared with the long term cost of not entering debt settlement.
It is important to remember that no debt relief option is ever going to be cost free, although debt settlement is more affordable than bankruptcy or a consumer proposal.
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The Cost Of Not Entering Debt Settlement
If you decide to carry on as you are and try to pay your debts down, or you decide to opt for a different kind of debt relief, it is likely to cost you a lot.
The cost of doing nothing is almost always higher than the cost of debt settlement.
These are some of the main costs of not entering debt settlement.
Emotional Cost
Before you consider the financial cost, it is important to recognize the emotional cost.
If you are looking into debt relief options, you already know how stressful it is to be in a lot of debt.
Money worries are one of the most common causes of stress and relationship issues, so the emotional cost of not entering debt settlement can be huge.
Interest and Late Fees
The cost of debt settlement is always going to be lower than the cost of interest and late fees on debts that you cannot afford to repay.
The longer you avoid debt relief, the more interest you will pay and the more late charges you will build up.
The interest compounds on the total amount owed, which means you are charged interest on interest and it becomes harder and harder to pay the debt off.
Over time, the difference between the cost of debt settlement and the cost of paying off the total debt will be very significant.
But if you opt for debt settlement early, you can save a lot of money.
The Cost of New Loans
Even after you pay off your debt, your credit rating will still be very poor.
If you ever need to borrow again in the future, the interest rate on those new loans will be incredibly high.
However, if you opt for a debt settlement option and pay your debts off faster, you can improve your credit score and get better rates on any new loans.
The Cost of Debt Settlement
Although the cost of debt settlement is a lot lower than the cost of inaction, it is still important that you consider how much you will need to pay.
Program Fees
The majority of the cost of debt settlement is made up by the program fees.
The fees are dependent on the amount of debt that needs to be settled, which province or territory you live in, and the length of time that you are in the debt settlement program.
Regardless of the cost of debt settlement, you will almost always save money in comparison to other debt relief options, like credit counselling.
With other debt relief options, the principal amount is the same, but when you opt for debt settlement, you will pay a lower amount as agreed with your creditors.
The cost of debt settlement is also lower than bankruptcy because you will not have to give up any of your assets.
Credit Rating Issues
Your credit score is always going to be negatively affected by debt relief, but when you opt for debt settlement, the impact is a lot lower than it would be with other debt relief options, like a consumer proposal or bankruptcy.
As long as you go with the right debt settlement company, they will negotiate with creditors and reduce the impact on your credit rating as much as possible.
Find Out More About Debt Settlement
Every case is different, so the only way to know for sure what the cost of debt settlement will be for you is to get in touch with a debt settlement company and have a consultation.
You can call us today or fill out an evaluation form to find out more about debt settlement.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Canadian Bankruptcies
How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?
