The Drawbacks of Debt Settlement Software

Debt settlement software is often a cheaper solution than hiring a debt settlement attorney or paying agency fees to reduce your debt burden. The software, similar to tax filing software, takes you through simple questions using the information you have about your income and debts. The software will then make recommendations about how and when to settle debts, and you can carry out these recommendations on your own. Despite the lower expense, the software does have shortcomings that make it an unattractive option for some borrowers.

No Existing Relationships with Lenders

Some of the nation's largest debt settlement companies have relationships with lenders in many areas. These companies have successfully negotiated settlement deals in the past, and the lenders have familiarity with their processes. In fact, since the settlement companies often assist he lenders in collecting large sums from otherwise delinquent borrowers, the lenders may even have a positive relationship with the settlement representatives. You will not have the same insider relationship with the lending world. When you are negotiating for yourself, you may not know the right strings to pull when it comes time to negotiate.

Lack of Advice on Weighing Options

You should understand there are more options than settlement alone when it comes to reducing your debt burden. Options include modification, refinancing, deferral or even bankruptcy. No option should be considered off limits if it can deliver you the ultimate goal of living debt free. When you go through the process, you may have questions about whether you should include a certain debt in the settlement or whether you should attempt to pay off the debt on schedule. You may even wonder what affect the process will have on your credit when compared to bankruptcy. These questions are important to ask, but debt settlement software cannot answer them.

Lack of Loan Servicing

Ultimately, when you settle debt you will have to write a large check. The whole point of settlement is to pay your lenders one lump sum to account for your entire outstanding balance. Most borrowers entering settlement will not have this sum available in cash. They will need a loan, and a debt settlement agency can provide that loan. If you do not have the cash you need, you will have to seek an alternative lender in addition to using your settlement software to get the job done. It may be easier to go through the process in one location rather than in two.

Legal Hurdles and Challenges

There are many legal questions involved with debt burdens since debt is essentially a contract. The contract may be incorrect, expired or need modification. Some individuals will prefer to work with an attorney to make sure all of these issues are handled carefully. If you are uncertain whether a lender has a legal claim to your outstanding debt, for example, you will want to check with the laws of your state and ask questions of a person knowledgeable in contracts. Without an agent or attorney, you could be making unnecessary payments or simply failing to legally absolve the debt, even though you think you have completed the process.


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