Debt settlement is a debt negotiation or debt arbitration process that allows consumers to make defined agreements with their creditors in order to greatly reduce the amount of debt owned. Traditionally a consumer will retain the representation from an attorney or debt settlement specialist who will then go through each credit line account and negotiate terms such as the payment schedule, interest rate, and possibly remove any late payment penalties and even remove negative information that was placed on your credit report.
The arbitration process can not only reduce the amount of interest you owe but can also reduce the principle owed, especially if the debt is known as “deferred debt”. Most debt settlement services work on the basis of commission in regards to how much money they save you, if you have a low amount of total debt the company or law firm may charge you a flat fee for the negotiation services.
The process is different then debt consolidation because under debt consolidation programs there are strict minimum debt amount requirements and debt is not negotiated, it is consolidated into a singular monthly payment with it’s own interest rate.