Debt settlement sounds like an appealing option to anyone who is feeling bogged down by payments and sees commercials romanticizing the idea of getting out of debt as soon as today. Before you dive right in and decide to pursue debt settlement, it’s important to understand the consequences of this decision, as well as the truth and myths you might have heard.

Myth: anyone can have their credit card balance cut in half

Before debt settlement is given as an option to borrowers, creditors will verify your income, assets, and current debt to be sure that you truly cannot make your payments and need your debts settled. If lenders believe that you can, indeed, make payments, they might offer you a debt management plan instead.

Myth: the only way to settle my debt is to hire someone to handle it

While it is not required to have an expert help you settle your debts, and you can communicate with creditors directly, it also doesn’t hurt to have someone in your corner who has expertise in this field.

Myth: I have to pay up front to have my debt settled

This is no longer the case, as debt settlement companies were recently banned from collecting any sort of fees in advance of their services. Any money that is set aside for fees and taxes by the consumer are controlled by the consumer only, and not the creditor. The consumer never loses control over their money.

Myth: debt settlement won’t affect my credit score

Unfortunately, this is not true. In fact, debt settlement has a very significant and negative impact on your credit score. This is a big part of the reason why debt settlement is not recommended to borrowers, especially if there is another viable option such as debt management. Debt settlement can hurt your credit just as much as filing for bankruptcy would.

Myth: going through a debt settlement company is low cost

This isn’t true as debt settlement companies charge you a percentage of the savings that they negotiate. This is on top of other fees and taxes you end up paying after debt settlement, so these numbers can add up. And, depending on the amount of debt, the percentage they collect can be a higher number than you are comfortable with.

Myth: I have to settle or my debt will stick with me forever

Collecting debt has an expiration date. The statute of limitation on collecting debt varies from each state, but if the debt hasn’t been paid for a number of years, it’s tough to be forced to in a court. In the same vein, any negative information on your credit report that details your failure to pay will go away after seven years.