Free Yourself From Debt With Debt Settlement
Without careful budgeting and responsible spending, people can easily find themselves deep into debt. For instance, the convenience of credit cards makes it hard to resist buying items on impulse. There are also the subtle minimum balance payments hikes (e.g. increase from 2 percent of the principal outstanding to 4 percent). One option for handling this kind of debt is through a credit card debt settlement.
There are other options — filing for bankruptcy, using a Consumer Credit Counseling Service (CCCS), getting a Debt Consolidation loan, doing nothing (especially if unemployed and there are no assets for creditors to pursue), to name a few. Before making a decision, however, you must be aware of the advantages and disadvantages. Before settling credit card debt, the following pros and cons should be considered:A debt settlement program is essentially debt relief, with the outstanding balance reduced up to 40-60 percent, depending on how well you or the settlement company negotiates with creditors. This is better than filing for bankruptcy, which stays in your credit record for up to 10 years. It is also preferable to getting a loan and risking properties and assets being taken away.Payment is simple — just deposit a single monthly payment to a trust account set up by the settlement company. After negotiations, the accumulated amount is used to pay off creditors. This way, you don’t worry about different interest rates and multiple creditors.Creditors are less likely to file a lawsuit if you are in a settlement program. Negotiations could also include elimination or minimizing extra charges such as late payment fees. Unfair collection practices and harassing collection calls can also be avoided if a debt settlement program is in place.However, one’s credit score will still be affected. Creditors may forgive part of the debt, but late payments or charge-offs can lower one’s credit rating. Unless negotiated with them, the account status on the credit report will be “Settled”, which has a negative impact on one’s score, as opposed to “Paid in full” status.Another drawback is that, if it takes more than 18-24 months to negotiate settlements, bankruptcy might be the better option. The chances of accomplishing one’s settlement objectives become lesser the longer it takes to reach an agreement with creditors. In the meantime, the credit card debt becomes larger.Given the pros and cons above, the settlement option is obviously not a perfect solution to credit card debt. A debt settlement program provides a quick way out of debt, but could cost you your credit rating. However, if you are willing to take a chance and accept the potential drawbacks, then debt settlement could be the best option for you.
