Debt Settlement and Debt Reduction in UK

  • Do you have unmanageable debt problems?
  • Do you owe more than £15,000?
  • Is it no longer possible to get new loans and credit cards?
  • Are you considering declaring bankruptcy?

Debt Settlement companies may be able to help. It is a way to reduce your debt and potentially avoid bankruptcy.

Note, I am not trying to promote any company or even recommend this strategy. I have not done it myself, but it could be a viable solution to serious debt issues. It is highly advisable to take independent financial advise from a qualified debt adviser. This is just my understanding of how debt settlement’s work

How Debt Settlement works.

A debt settlement company will negotiate with your banks and lending companies. It negotiates a settlement so that they will pay off your debt on your behalf. However, they will negotiate to pay only a certain % of the debt, in return for a one off payment. In return for getting this one off payment, the bank agrees to tell credit agency’s that you have cleared your debts. The debt is said to have been “settled in full”. However, note this is slightly different to “paid in full.” see problems of debt settlement.

Basically the debt settlement companies negotiates a way to pay only a % of your debt.

Therefore, if you owed £20,000 to several companies and several credit cards, you could now owe just £10,000 to the debt relief company.

Then over a period of a number of years you pay a set monthly amount to the debt relief companies until your debt is paid off.

Benefits of Debt management companies.

1. Your creditors get at least a certain % of the amount you owe them. It is better than getting nothing if you were to be declared bankrupt.
2. The Debt relief company will benefit from charging you interest on the remaining debt they negotiate.
3. You benefit from having:

  • less total debt
  • the ability to wipe clear credit.
  • Avoid Bankruptcy
  • Just one loan to pay, rather than several
  • the chance for a new start and the potential to be debt free in 5 years or so.

Potential pitfalls of Debt settlements

  • When getting a debt settlement, check the interest rate they will be charging.
  • Look at the monthly payments, is it a realistic objective to pay that much
  • This is probably a last ditch solution. It is preferable to avoid getting into this situation in the first place.
  • Debt settlement doesn’t mean you can just ignore the problem of underlying financial problems. Look into how such debt can be avoided in the first place.
  • Can Harm Credit rating: See problems of debt settlement