Credit counselors can review your income, budget, expenses, and debts to assess whether a DMP is a good fit for you. As a result, your credit utilization rate could rise, which may affect your credit rating. There is a reason why the Federal Trade Commission, the Consumer Financial Protection Bureau, and the National Foundation for Credit Counseling warn consumers of the risks of profit-based debt settlement. You may have more debts than you started.
What is a disadvantage of participating in a debt settlement program?
The downside of this is that while you’re working on your debt settlement plan, the increased debt, late fees, and missed payments significantly affect your credit score. There are plenty of “debt relief” options out there, but it can be hard to sift through them and figure out who to trust. The benefits of settling debt in potentially saved dollars could make it a compelling option for debt relief, but consumers should consider the conditions associated with making the best decisions to reduce debt
References:
- Advantages & Disadvantages of Debt Relief Programs | Pocketsense
- Debt Relief Programs: The Pros and Cons of Each Type – NFCC – National Foundation for Credit Counseling
Barry Ritholtz is a renowned finance expert, author and blogger. With over 30 years of experience in the financial industry he has gained a reputation as a thought leader and influencer in the investment community.