How Long Does Debt Settlement Take?

Exploring the Length of a Debt Settlement Program

The journey to becoming debt-free is paved with several options. Each choice, however, has its own merits and pitfalls. Understanding the time-frame, cost, and impact on your credit score for each option is crucial. One popular choice among these is debt settlement. But, the question that often arises is: How long does debt settlement take? Let’s delve into the details.

What is Debt Settlement?

Debt settlement is a process where a debtor negotiates with creditors to accept a lesser amount than what is owed. This method is often chosen by those who wish to avoid the devastating effects of bankruptcy on their financial future.

Factors Impacting Debt Settlement Duration

The time it takes for debt settlement varies significantly based on a few key factors:

  1. Amount of Debt: The higher the debt, the longer it may take to settle it.
  2. Monthly Payment Capability: Your ability to make regular payments will also determine the length of the settlement process.

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Debt Settlement vs. Other Debt Solutions

While debt settlement might not be the fastest way to become debt-free, it can potentially save you from losing your assets. Let’s compare debt settlement to other programs such as debt consolidation and credit counselling.

Debt Consolidation

Debt consolidation involves taking a new loan to pay off all your current debts. This can be a good option if you can get a significantly lower interest rate.

Credit Counselling

Credit counselling agencies work with your creditors to reduce your interest rates and make a repayment plan. This can be a better option for some, as it doesn’t involve taking on new debt like consolidation.

Debt Settlement: A Case Study

Let’s consider an individual with a debt of $30,000 at an interest rate of 20%. We’ll compare how debt settlement stacks up against other options in this scenario.

Note: For the purpose of this comparison, we’re assuming that the individual is making only the minimum payments on the debt.

Original Loan

  • Principal: $30,000
  • Interest Rate: 20%
  • Term: 10 years
  • Total Interest: $39,572.04
  • Total Paid: $69,572.04

Debt Consolidation

  • Principal: $30,000
  • Interest Rate: 15%
  • Term: 3 years
  • Total Interest: $7,438.55
  • Total Paid: $37,438.55
  • Savings: 46.2%

Credit Counselling

  • Principal: $30,000
  • Interest Rate: 4%
  • Term: 2 years
  • Total Interest: $1,265.94
  • Total Paid: $31,265.94
  • Savings: 55.1%

Debt Settlement (with interest)

  • Principal: $15,000
  • Interest Rate: 20%
  • Term: 3 years
  • Total Interest: $5,068.34
  • Total Paid: $20,068.34
  • Savings: 71.2%

Debt Settlement (without interest)

  • Principal: $15,000
  • Total Paid: $15,000
  • Savings: 78.5%

From the above comparison, it is clear that debt settlement, even if it takes longer, can result in substantial savings.

Discuss options to get out of debt with a trained & licensed debt relief professional.

Is Debt Settlement Right for You?

Debt settlement might not be the quickest route to financial freedom, but it does offer considerable savings. However, it’s crucial to evaluate your circumstances and consult with a professional to determine the best course of action.

Conclusion

Navigating the path of debt relief often involves a careful balancing act. While the question, ‘How long does debt settlement take?’ is important, it’s just one piece of the puzzle. Evaluating the cost, impact on credit score, and potential savings are equally important. Remember, the quickest way out of debt may not always be the best.

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During our initial meeting, they took the time to understand my debt and financial circumstances. They explained the various options available to me and helped create a personalized plan that would be most beneficial for my situation. With their assistance, I was able to avoid declaring bankruptcy by presenting a consumer proposal to my creditors. Fortunately, my proposal was accepted, and I am extremely relieved to finally be free of debt, all thanks to BankruptcyCanada. The burden on my shoulders feels significantly lighter now, and I truly believe that Bankruptcy Canada has the most skilled specialists in debt relief.

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When you are considering debt settlement for your situation, time is often a priority.

Consequently, for debtors, one of the most important questions to figure out is: How long does debt settlement take?

A debt-relief solution that gets you debt-free as quickly as possible might seem, at first, like the best option.

However, time is one of the factors you need to take into account when addressing your debt.

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The right debt relief strategy needs to balance your priorities, whether they are:

 

 

If you look at the big picture, the time factor may not be the right priority for you.

Someone who needs fast debt relief may not expect the same end result as someone who wants to preserve their credit rating as much as possible, for instance.

Understanding whether debt settlement is right for you depends on your financial objectives.

Debt settlement duration

A debt settlement program doesn’t have a strict time frame.

The duration of your debt settlement is determined by your individual situation: the amount of debt and how much you can afford to pay toward amortizing it each month.

Therefore, debt settlement takes, in theory, as long as you need to repay the agreed amount.

Typically, this program will get people out of debt within 1 to 3 years.

Is a debt settlement program the fastest solution?

If time is your priority to get out of debt, a debt settlement program doesn’t offer the fastest debt resolution approach.

Filing for personal bankruptcy can get you out of debt within 9 months if you’re a first-time filer.

Comparing costs, personal bankruptcy can be a cost-saving approach to debt, as you are responsible for paying a minimum of $1,800.00 over the term of the bankruptcy.

The minimum cost is set by the government, which means that it is the same for everyone.

On the other hand, a debt settlement program will negotiate the partial repayment of your debt, which is likely to exceed the minimum bankruptcy cost.

Finally, it is crucial to understand that, while first-time bankruptcy filers can be discharged from debt in under a year, the process gets you an R9 credit rating, which is the worst possible rating.

In bankruptcy, you need to surrender your assets, such as personal property, including your home and vehicles.

As a result, you are debt-free, but you need to rebuild your financial situation from scratch.

On the other hand, debt settlement allows you to protect your assets as long as you comply with the terms of the agreement.

Your credit rating will be 7 after the debt settlement program.

Is debt settlement my only option outside of personal bankruptcy?

Debt settlement is one of the debt management programs available.

The best way to define whether it is the right solution for you is to compare the different debt programs.

Debt consolidation can reduce the total interest rate on your debt repayment by combining all debts under a single consolidation loan.

This allows you to amortize the totality of the debt over a shorter time and to save cost in total interest payments.

Credit counselling can provide support alongside an existing debt program.

Credit counselling companies can negotiate elements such as your interest rate and the length of repayment terms, saving you time and money.

The consumer proposal is an individual proposal designed by a Licensed Insolvency Trustee, which offers a type of consolidation loan over a maximum period of 5 years or 60 months.

The trustee will also negotiate a repayment amount based on what the debtor can afford to pay.

At the end of the consumer proposal, you are debt-free.

Consumer proposals have a high acceptance rate.

Finally, the company can negotiate with creditors a lesser repayment amount over a shorter term.

If the creditors accept the negotiations, the debt can save money both on interests and debt amount.

Who is debt settlement programs for?

Debt settlement programs are an ideal solution for debtors who want to save money while making the payments they can afford to amortize the debt.

Like the consumer proposal, debt settlement reduces the amount of the debt, the duration of payment, and the interest rate.

However, it’s important to mention that creditors may not accept to negotiate with debt settlement companies.

Debtors who can go through a debt settlement program are in a better position to rebuild their finances once the debt is over.

Unsure whether a debt settlement program is the right solution for you?

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