Key Points

  • Not all debt elimination strategies produce the same results.
  • DIY debt settlement could result in paying more, increasing your vulnerability to litigation, and crushing your credit for a longer timeframe.
  • Companies specializing in debt settlement understand the debt cycle and know when to begin negotiating to ensure the lowest possible settlement.
  • Many debt settlement companies have relationships with individuals at collection agencies, debt buyers and original creditors that work specifically with debt settlement companies under defined strategies for the mutual benefit of all parties.
Why You Should Enlist the Help of a Debt Settlement Company Even Though You Can Do It Yourself

Another month passes, and the bills arrive like clockwork.

It is stressful to see so much of your income going to the minimum payment on credit card debts. You know the amount you pay barely covers the interest, but you don’t have enough to add any more to the minimum payment required.

When you consider viable ways to get out of debt, so you can experience some level of financial freedom, it feels like an impossible task. It’s not like you can forego food, utilities or the mortgage payment to pay down debt faster.

DIY Options for Debt Elimination

Do-it-yourself solutions typically include the minimum payment strategy, the debt snowball, or the debt avalanche methods. Regardless of how you choose to eliminate debt, you must first stop making additional purchases on credit card accounts if you want any hope of reducing or eliminating current balances.

The minimum payment method is the easiest, most expensive, and least effective route to eliminate debt. In fact, depending on your age when you start this debt elimination strategy, it is likely that your debt will outlive you. One of the primary features of a credit card is the low monthly payment in relation to the balance. Credit card interest rates typically average 17.89%. Paying only the minimum payment due each month could take 30 years or more to pay off existing balances and result in paying 3X or more the original amount charged to your account.

The debt snowball method involves first listing your debts from smallest to largest. You begin by paying the minimum on all debts except the smallest debt.  Each month, you pay as much above the minimum payment on the smallest debt until the smallest debt is paid off. Once you pay off the smallest debt, you move to the next smallest and begin making the larger payment on that debt, while still making only the minimum payments on all other accounts. This method gives you the fastest win. Using the debt snowball method, you pay each debt in full but could end up repaying higher amounts of interest because the focus is paying off the smallest debt balance regardless of the interest charged.

The avalanche method recommends listing debts by interest rate. To eliminate debt, you make the minimum payments on every debt, except the one with the highest interest rate. Each month, after minimum payment on all other accounts, you pay as much as you can in extra payments to reduce the balance as quickly as possible.  Each month you repeat this process until the account with the highest interest rate is paid off, then you repeat the process for the account with the next highest interest rate. This method will result in paying less interest, but it might take much longer before you pay off your first debt, depending on the starting balance and how much extra you can pay each month.

DIY Debt Settlement

The above methods involve paying the balance in full and can take years to achieve freedom from debt. However, if you face some type of financial hardship, it might be difficult or impossible to even keep up with the minimum payments, making it even more challenging to pay off unsecured debt.

In circumstances such as these, where you may have experienced the loss of a job, a reduction in hours, unexpected medical illness that leads to a disability or high medical bills, or if you lost a spouse or family member, you may be able to qualify for programs offered by creditors or collection agencies that will allow you to pay something, but less than the full amount owed to fully satisfy the account.  While these program do exist, creditors and collectors don’t usually voluntarily offer these programs, so it is up to you to ask if your account qualifies for a settlement, provide the documentation of your hardship and negotiate a favorable settlement to pay off the account for less than the full amount owed. While you can complete these negotiations yourself, the process requires an understanding of the debt lifecycle and knowing which creditors are open to negotiating at what discount.

Negotiating debts include several variables. Factors include who owns the debt, where the debt is in the debt cycle, the creditors’ propensity to negotiate, and the likelihood that the creditor will turn to litigation as a means of collection.

Outside of negotiating a monetary payoff, creditors might agree to a payment arrangement instead of a lump sum payoff, and the removal of derogatory marks from your credit file.

The Benefits of Partnering with a Debt Settlement Agency

Debt settlement agencies have extensive experience working with creditors and know which ones will negotiate at what levels. They also understand the debt cycle, which determines how much leverage you have based on your specific hardship and how they can use that leverage to reach a lower settlement of your debt.

Creditors may accept one settlement requiring a lump sum payment and another for a term settlement or a series of monthly payments. Understanding how to negotiate these details can ultimately lower the amount you must pay to eliminate the debt.

Many debt settlement agencies also have long standing relationships with creditors, collectors and collection law firm that have defined collection policies for consumers who are enrolled with debt settlement agencies and who have qualifying hardships.  Under these policies, the collectors and the debt settlement companies operate in a mutually beneficial way to the benefit of all parties to reach an equitable settlement of the outstanding debt.  Removing the adversarial nature of debt collection from the equation leads to successful outcomes for both the debt settlement companies and the party collecting the debt, as well as providing the needed relief for the client seeking to settle their debt.


  • Can I complete debt settlement myself?

    DIY debt settlement is a time-consuming process that involves calling each creditor and negotiating a debt payoff for less than the full balance. While it is possible, many people are not as successful in the process, compared to hiring an experienced debt negotiation firm to represent their interests.

  • Do credit card companies forgive debt?

    Creditors do not typically forgive a debt if they believe you can pay the balance. However, in some cases, when you can demonstrate a qualifying financial hardship, you could negotiate a settlement for less than the full amount owed, if you are comfortable negotiating with aggressive debt collectors.

  • When a creditor writes off the debt, does that eliminate the debt?

    No. Creditors typically write off, or charge-off, delinquent debt after six months of non-payment. However, the creditor can then sell the debt to a debt buyer, who will try and collect payments from you, The creditor may also keep the debt and try to continue collecting after the account has charged off, or they may choose to sue you to recover the current balance before the statute of limitations expires.