Credit card debt is something that plagues many Americans. Credit card companies often entice customers into paying the minimum balance. Sometimes consumers have no choice but to pay the minimum balance because of other pressing financial needs. In either situation, the consumer accrues debt, which can lead to missed payments and lower the creditor score of the debtor. Those affected by credit card debt know the value of a being debt-free and worry-free.
A debt-free lifestyle can be reached in different ways. Many debtors decide to reach their financial goals via a debt settlement program. If you are in debt, you may be a good candidate for credit card debt settlement. Discover the various debt settlement programs available to negotiate your credit card debt. Read about how it works and how to avoid bankruptcy using debt negotiation services.
What is debt settlement?
Debt settlement involves a creditor accepting less than the full amount—usually between 20 and 75 percent—of what you, the debtor, owes. The amount must be agreed upon by both parties and paid in one lump sum. You must then stop making payments on your debt to save up for this one-time payment. If you have multiple debts, you must handle them one at a time. This may take several years depending on how much you have to save up and pay back.
Needless to say, for the creditor, this route is usually only taken as an alternative to not getting paid at all due to the debtor’s risk of filing for bankruptcy. A creditor would much rather receive a partial amount of the debt than to receive nothing at all. Keep in mind that this is a last resort of a credit card company. Most creditors don’t advertise for debt settlement, and most won’t agree to even discuss debt settlement unless the debtor has fallen behind in his/her payments—sometimes by as much as three to six months.
There are both risks and benefits to settling your debts. Once you settle, any previous history of late payments will remain on your credit report, which can then lower your credit score. On the other hand, the alternative—filing for bankruptcy—will follow you around for as long as seven to 10 years.
How to choose a debt settlement program
A debt settlement program offers experience and expertise in handling creditors. If you are new to the world of debt settlement, it’s comforting to let a professional guide you through the process. However, be aware that there are predatory companies out there who try to rip off unsuspecting and desperate debtors. Even so, choosing a debt settlement company doesn’t have to be difficult, given the wide selection. There are even faith-based options, such as Christian debt settlement companies, and specialized debt settlement attorneys out there. Being an informed consumer is your best bet for avoiding scam artists and settling your debts for good.
First, be sure the company you choose is accredited by The Association of Settlement Companies (TASC). This will ensure that the company is regularly evaluated for competence and performance. While you’re at it, you should also check to see if the debt settlement program is a member of the Better Business Bureau or the local Chamber of Commerce. Another thing to consider is the quality of their debt arbitrators. Are they IAPDA certified? Asking these questions up front will save you time and money in the long run.
Other important debt settlement services include settlement or refund guarantees and bankruptcy assistance in the case that debt settlement doesn’t work out. If you do end up filing for bankruptcy, some debt settlement companies will offer a refund to help pay for a bankruptcy attorney. If the company does offer such a guarantee, be sure to discuss it fully and get it in writing.
Last, but definitely not least, is cost. It may seem difficult to get a straight answer when it comes to a credit card debt settlement company’s fees. Some companies charge a percentage of your total debt, which could be as much as 15 to 18 percent. Others charge a percentage of the debt savings, which is typically about 25 percent. There can also be sign-up fees and monthly charges. There are many models out there, and it’s best to find this out as soon as possible to calculate whether or not it’s in your best interest to use a debt settlement service. It’s time to take control of your financial future. You must always be a wise and informed consumer, even when it comes to your debt settlement company. You’ll be glad you did!