How Long Does it Take for a Debt Settlement?
If you consider the impact of a debt relief option on your credit score and the cost at stake, the option where you can eliminate your debts faster is not necessarily the best. Each debt relief option varies, and each carries a consequence that is unique to the other.
Taking certain factors into consideration can save you time and energy in qualifying for a debt relief solution that may not be suitable for your goal to get out of debt. Moreover, your primary goal in addressing your issues with your debt should center to the following:
- The duration or time frame that you can be free from debt
- The cost that you need to pay to settle your debts
- The impact on your credit once you are deemed to be free from indebtedness
Are There Debt Solutions That is More Faster than Debt Settlement?
If you’re thinking that debt settlement is the fastest mean to get rid of your debt, you’re wrong. The fastest way to get off your debt is through bankruptcy. In bankruptcy, you can come out debt-free in just a matter of nine months. This is possible if it’s your first filing for personal bankruptcy. However, considering the process and the disadvantages of bankruptcy, getting out of your debt for as early as nine months may not be beneficial for you.
Moreover, if you are not willing to surrender your property or assets, the time frame of bankruptcy won’t help you best. In fact, though not all of your assets will be seized since you’ll be left with those in exempt, still the impact of bankruptcy in your credit and your living standard is too drastic to bear.
On the contrary, debt settlement may take more than nine months, but the advantages that you enjoy after fulfilling the terms are worth the wait. Significantly, you don’t have to sacrifice your assets, making it more possible for you to restore your finances shortly rather than if you prefer to favor the speedy process of bankruptcy.
How Long Will it Take for Debt Settlement?
Every individual who qualifies for debt settlement varies in terms of the duration. This is because there is no specific time frame for a debt settlement. In general, it usually takes approximately 1 to 3 years for an individual to complete the terms. The only way to determine how long will it take you for a debt settlement is through your situation. These factors include your maximum consumer debts and the amount that you can offer to settle your debts.
Comparison between Debt Settlement and Other Options
For you to get a clear picture of which debt relief option might be favorable for you, it is best to compare debt settlement with the other debt relief solutions.
Example: If your consumer debt amounts to $30,000 with a 20% interest that you’re paying each month. Putting in case that your debt amortization is over 10 years, it will sum up to $69,572.04 through the duration provided that you’re only paying the minimum every month. Looking at the numbers wherein you owe $30,000, which will cost up to $69,572.04 over the duration, it implies that you’re paying $39,572.04 on your interest rates.
If you are to consider debt consolidation to save some extras, your loan interest will be lessened for up to 15% and can get an amortization of your principal for over 3 years. In this case, your total spends to pay off your debt amounts to $30,000 plus the interest of $7,438.55, getting the sum of $37,438.55 as your total debt payments.
On the other hand, let’s say a credit counselling agency negotiated a 4% interest reduction with a 2 years amortization. This set up will give you a $31,265.94 as the total amount needed to pay off your debt. This is because lowering the interest rates to 4% will give you$1,265.94 interest payments. Thus, the same as in debt consolidation you will still pay the amount that you owe which is $30,000.
Furthermore, assuming that your agency negotiated with your creditors to settle your debt paid in full for $15,000 over three years duration without reduction on your interest. You will just be paying a total of $20,068.34, which comprises the $15,000 plus the $5,068.34 in interest payments. Significantly, if you settle your debt by paying a lump sum to your creditors, you’ll only need $15,000 to pay your debt in full.
This makes it clear that you can save more money in a debt settlement than in other debt relief programs. This is, of course, considering the total debt that you owe and the capacity or you to make the necessary payments.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.