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The following is a guest post from DebtConsolidationCare.com

With the consumer credit card debt level spiraling out of control, the debtors in America are running to debt settlement companies for seeking financial help. As the debt settlement companies are the only debt relief option that can drastically reduce the total outstanding principal debt amount, it is the most sought-after option. But as most debtors are confused by the negative reports of the debt settlement companies, they’re unaware whether or not they are a boon or a bane to the debtors. Have a look at some points that’ll clear your confusion and help you take the right decision when it comes to settling your debts through a debt settlement company.

The pros of settling your debts

There are certainly some benefits of debt settlement that makes it one of the most sought-after debt relief options. Check out some of them so that you know whether it is a boon or a bane.

1- Reduces your monthly payment: The best way debt settlement can help you is by reducing your principal amount so that repayment becomes easier for you. While you enroll with a debt settlement company, the debt consultant will negotiate with your creditors in order to reduce the debt amount. The reduction will be on the total outstanding principal amount. The amount reduced will range from 40-50% and this can considerably reduce your monthly payments.

2- A single monthly payment: The debt settlement program requires you to make a single monthly payment to the debt settlement company. Instead of making multiple payments to multiple creditors, you just need to make a single monthly payment to the debt consultant of that company. This money will be accumulated in a ‘trusted account’ and will be disbursed off to your creditors in due course of time.

3- Helps you avoid bankruptcy: Debt settlement is the best option that can help you avert the risk of filing a bankruptcy. As you can regularly make the repayments to your creditors, you’ll be able to make them satisfied and therefore there will be no risk of facing a foreclosure.

The cons of settling your debts

As there are two sides of a coin, there are some flip-sides of using debt settlement as your debt relief option. Check them out.

1- Taxable income: The amount of money that is forgiven by your creditors will be considered as taxable income. As you gain that money back, the IRS will deem it to be an income on your end, and thus you need to pay tax on it.

2- Effect on your credit score: Debt settlement affects your credit score terribly. As you do not pay the whole amount, your creditors will report to the credit bureaus as “paid as settled”. This will hurt your credit score.

Therefore, if you can look for immediate credit repair, you can easily choose debt settlement as an option. As the FTC has cracked the new set of rules, the consumers feel more protected now. They can seek the help of debt settlement companies for coming out of debt.

Came across this infographic today and thought it was interesting. You may be surprised as you look over some of the facts about payday loans.

Keep in mind that if you’re in need of money, payday loans are not the only solution out there. The problems that people seem to usually run into with payday loans is taking out more than they should. If your credit is good, you might be better of just using your credit card, or getting some kind of short term loan from the bank. Look over your options before running to the local payday loan store!