What’s the difference between debt validation vs debt settlement?

If you owe any debts, you’ve probably heard the terms debt validation and debt settlement. You may be wondering if either one is right for you in your attempt to get out of debt. In order to decide your best route, you’ll need to understand the difference between debt validation vs debt settlement.

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Debt Validation

Debt validation is every person’s right to force the debt collector to prove that a debt is owed. Requesting debt validation requires that a written request is sent to the debt collector before the end of 30 days after being contacted by the collection agency.

Debt Settlement

Debt settlement is an attempt to work with a third-party company in order to attempt to reduce a debt through negotiations with creditors. Companies that provide debt settlement services also go by debt relief or debt adjustment companies. They will contact the creditor on your behalf in an attempt to renegotiate your debt.

Debt Validation: What is it?

What to do after receiving a debt validation letter

Debt collectors are required to send you a debt validation letter which states your debt, the amount you owe, and other relevant information. If you receive one of these letters, you don’t want to pay without validating the debt. First, you will want to review the letter, which will have important information about the debt as well as legal debt collection statements. There should also be an address for the debt collector that you can use to contact them with a debt verification letter.

You can send a verification letter to the debt collector asking them to prove that the debt is yours. It’s best to do so if the debt collector is acting aggressively or if you intend on paying the debt. Keep in mind that if the debt is close to its statute of limitations, you may be better off ignoring the letter and just waiting for the debt to expire.

If you do decide to send a verification letter, the debt collector has a few ways to validate the debt.

What does a collection agency need to validate a debt?

When you send a validation request letter, you will want to ask the debt collector for a number of things that can be used to validate the debt. Request information about why the debt collector thinks you owe the debt, evidence of the amount and age of the debt, as well as their legal authority to collect debt in your state.

Keep in mind that the debt collector isn’t obligated to provide you with the information that you request. The only information they legally must provide for validation is the information about the original creditor, the balance that you owe, and the person who owes the debt’s name.

How long does a debt collector have to validate a debt?

The debt collector must send their validation letter within 5 days of first contact. Then, if you send your verification letter within 30 days after first contact, the debt collector has to cease payment collection until they have verified that the debt is yours. If the debt collector doesn’t hear from you within those 30 days, they can assume that the debt is yours and continue pursuing debt collection.

Does debt validation work?

While the debt collector doesn’t have to provide you with all of the information that you request, there is a chance that you will receive the debt invalidation you are seeking. If you receive sufficient validation, you can confirm that the debt is within the statute of limitations. You can also check to see if the debt is within the credit reporting time period. If your debt is past the credit reporting limit, debt collectors are not able to report your debt to credit agencies. This information can help you decide whether to pay your debt, dispute the debt, seek a settlement, or if you should request the debt be removed from your report.

When debt validation can help

Debt validation can be extremely effective. If the debt collector is unable to validate your debt, you can request for the debt to be removed. Without validation, your credit report could be filled with multiple debts that don’t belong to you. A debt validation program also helps you decide on the best moves to make regarding your debt, including waiting for the statute of limitations, requesting a debt settlement, or simply paying your debt in full. By following the proper process outlined in this article, you may benefit from debt invalidation and proving that you don’t owe any debt.

Debt Settlement: What is it?

With debt settlement, you work with a third-party company in order to negotiate a lower amount than what you owe or set up a better payment plan. When you settle a debt, you come to an agreement with the creditor about the amount of money it will take to resolve the debt. With a better payment plan or a lower amount of total debt, you are more likely to make payments and, sooner than later, eliminate the debt.

Credit card debt settlement

Third-party companies are typically used in credit card debt settlement. They will contact your creditors in order to ask for a better payment plan, or even reduce and settle the debt. The debt settlement company will often negotiate with the creditor to reduce the total amount owed into a smaller, lump payment. They charge a fee, which is often a percentage of what you are saving on the debt.

During the debt negotiation process, they will often require that you deposit money into an account to save towards the lump payment. If you have been in the process of working with creditors to pay your debt, the debt settlement company will likely tell you to stop paying as they negotiate. At the end of the negotiation process, if an agreement is reached, you will have to agree to the new terms, make a payment on the debt, and will then be charged by the debt settlement company.

Is it bad to take a settlement on debt?

While it may sound great to use debt settlement to reduce your debt, there are no guarantees. In fact, there are a number of potential risks that accompany debt settlement. Before reaching out to a debt settlement company to begin the negotiation process, carefully consider the benefits and risks to decide if this is the right path for you.

Debt settlement options

If you decide that debt settlement is the right path for you, you will want to make sure and go with an experienced, reputable company. With the numerous risks involved with debt settlement, you want to work with a company that knows how to get the job done right, while being transparent and fair with their clients. Take a look at the top rated debt settlement company on Trustpilot:

1. TurboDebt

TurboDebt is an effective debt settlement company that works to help their clients take control of their finances. They help develop customized strategies for managing their circumstances and alleviating debt. With numerous five star ratings, TurboDebt has the experience to effectively help you manage and control your debt. Following their simple process, clients answer a few questions, receive a free consultation, choose from their top debt relief programs, and then get started with your custom strategy.

Debt Validation vs Debt Settlement: Which is Best For Me?

Debt validation helps you confirm that a debt is actually yours. When you opt for debt validation, you are gaining all of the necessary information about the debt in order to effectively begin paying on the debt or having it removed if the debt truly isn’t yours.

Debt settlement can help you reduce the debt that you owe. You can minimize your payments or even have a debt closed by making a lump sum payment of a negotiated price.

Now that you know the differences between debt validation vs debt settlement, it becomes clear that both of these debt options are valid and can be effective in certain situations. To understand the route that is best for you, and determine if debt validation or debt settlement is really worth it, take careful inventory of your financial circumstances.

Debt validation is a good option if your debt has been sold from the original creditor. When someone purchases a debt, they often don’t have a ton of information about it and often times you can benefit from debt invalidation. When they begin to collect a debt, they will sometimes have the wrong amount or be attempting to collect from someone that has a similar name. Seeking debt validation can help to reduce or even eliminate the debt, if the new creditor doesn’t have the necessary information.

Debt settlement may be the right path for people who aren’t making payments on their debt and have multiple missed payments on their credit report. For these people, a debt settlement program can be an effective option. Creditors can see that the debtor isn’t likely to make payments unless they negotiate, and therefore may be much more likely to settle the debt for less than owed.

If you find yourself in either of these positions, debt validation or debt settlement may be a good stop on your road to financial freedom.

Looking for further advice or assistance on debt relief options? See which is better: settling debt vs paying in full, or take advantage of a free debt relief consultation today.