Bring Yourself Out of Debt With a Debt Settlement Program
One of the most common financial difficulties that you can get into is credit card debt. Sometimes, it is easy to spend money you don’t have by using your credit card and ignoring your budget. Also, subtle minimum balance payment hikes sometimes happen, so that instead of paying just 2 percent of the principal outstanding, you are now required to pay twice that amount. One way to get out of credit card debt is through a debt settlement program.
There are other ways to handle debt such as filing for bankruptcy, using a Consumer Credit Counseling Service (CCCS), getting a Debt Consolidation loan or doing nothing (especially if unemployed and there are no assets for creditors to pursue). Each option has its pros and cons. The advantages and disadvantages of settling credit card debt are presented below:
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.
Instead of paying multiple bills monthly, you just need to deposit a single monthly payment to a trust account. The accumulated amount is used to pay creditors after the negotiation. You don’t pay multiple debts at different rates, and you don’t have to deal with multiple creditors at the same time.
You could also negotiate for extra charges, which could further damage your credit rating, to be minimized, if not eliminated. A debt settlement program could also protect you from unfair collection practices and harassing collection calls. Also, you are less likely to be on the other end of a lawsuit from creditors.
The main drawback, however, is that, settlement cannot stop your credit score from slipping. Late payments or charge-offs and a “Settled” account status on your credit report can do further damage. For example, unless negotiated with creditors, the account status on your credit report will be “Settled” instead of “Paid in full”.
Another disadvantage is when negotiations take more than 18-24 months. The chances of accomplishing one’s settlement objectives become lesser the longer it takes to reach an agreement with creditors. Your credit card debt only increases, and in the end, bankruptcy might be the better option.
It is important to remember that settlement is not a permanent solution if you are constantly having problems managing your credit card. It is not even a credit card debt solution that will suit everyone. However, if you accept the potential drawbacks, then a debt settlement program could work for you.
By: Mitch Lowe
Tags: Charge Offs, Collection Practices, Consumer Credit Counseling, Consumer Credit Counseling Service, Credit Card Debt, Credit Counseling Service, Credit Score, Creditors, Debt Consolidation Loan, Debt Relief, Debt Settlement Program, Drawback, Filing For Bankruptcy, Financial Difficulties, Getting A Loan, Late Payments, Minimum Balance, Settlement Company, Settling Credit Card Debt, Trust Account