How Much Does Debt Settlement Really Save?

Debt settlement can offer a glimmer of hope for those struggling with overwhelming debt. According to industry statistics, three-quarters of participants are able to settle their debt for less than what they owe. But what does this process actually entail, and how much can you expect to save in the long run?

When you enroll in a debt settlement program, you work with a company to build up funds in a savings account that will be used to negotiate settlements with your creditors. Typically, the company will advise you to stop making regular payments to your creditors in order to strengthen your position during negotiations.

The timeline for completing a debt settlement program can vary depending on several factors. The amount of debt you have, the type of settlement offer you accept, the number of accounts you enroll in the program, and how diligently you make your program deposits all play a role in determining how long it will take. On average, most customers receive their first settlement offer within four to five months, and it takes about four years to settle all debts.

On average, settlement offers result in a savings of around 32% after accounting for the debt settlement company’s fees. These fees typically range from 15% to 25% of the enrolled debt, with an average fee of $762 per successfully settled debt in 2022.

In addition to the settlement fees, there are other potential costs to consider. You may owe taxes on the forgiven debt, incur legal fees if creditors take legal action, experience credit damage due to missed payments, and face late fees and interest charges on unpaid debts.

After factoring in all costs, the average savings for debt settlement clients is around 18% on all debts enrolled in the program. While this can result in significant savings, it’s important to consider the full financial implications before committing to a debt settlement program.

In conclusion, debt settlement can offer relief for those struggling with debt, but it’s essential to understand the costs and potential savings associated with the process. By carefully weighing the pros and cons and seeking advice from financial experts, you can make an informed decision about whether debt settlement is the right option for you.