Do you think it is time to explore debt settlement for your credit cards? If so, then you will find this article very helpful in understanding the benefits and the hows when it comes to debt settlement. If you are having financial troubles the worse thing you can do is nothing, read this article so you at least know some of the options available to you.
Hiring a Debt Settlement Company – Benefits
Credit card debt is mainly unsecured debt, this type of debt is the easiest to get into trouble with, why? Because we have been well trained to “buy now, pay later”. On the other hand unsecured debt is harder to collect if a person defaults. Unlike a car or boat, credit card debt is backed up by a persons promise to pay, when they cannot afford to pay anymore the game changes.
If you get into financial trouble you have two choices: hire a company to do the debt settlement process for you or do it yourself. If the company has a good reputation they could be a great help to you. If your lender has worked with them before and gives you positive feedback, this is another plus. Here are a few of the benefits you can expect to get from hiring a debt settlement company:
- Experience – if the company has a good reputation, it is easier for them to negotiate with your lenders. They know what to say and what to do. This is an emotional situation, but a lender doesn’t care and this can make the whole deal go bad.
- Contacts – sometimes the company you choose has dealt with your lenders before, they have contacts. There are tremendous benefits to you if the settlement company has contacts among the lenders.
- Payments – you only make one payment to the settlement company, saves you the headache of having to make multiple payments.
- Single Contact – when you hire a debt settlement company you only have to contact one person. That agent deals with all your lenders which relieves you from that stress.
Debt settlement for credit cards is a big business. You have read some of the benefits, now the question is how much?
Debt Settlement Fees
Make this part of the process easy on yourself, be very wary of large upfront fees. To many times this has ended up in a horror story for the customer.
A small upfront fee is standard, taking a small percentage of each payment is normal, and a recovery fee at the end of the program is reasonable. This is how a legitimate debt settlement company works, a red flag should go up if large upfront fees are required.
Credit Card Settlement – Do It Yourself
So you’re thinking about doing this yourself, consider the following:
- Emotions – emotions are you biggest enemy. The lender wants their money, they want to make the best deal for their company, and if they see emotions in your negotiations they will take advantage of it.
- Education – you need to know what to negotiate. You must be willing to take time upfront to learn what is negotiable and what will save you the most money in a settlement. In a seemingly bad situation, this is really an opportunity to negotiate better terms and conditions. If you don’t know what you’re doing you may blow the chance to reduce a lot of your debt.
If you think you are prepared to do your best, then save a few bucks and do it yourself. Just remember… Trying to save a few bucks could cost you more in poor negotiations.
Impact On Credit
There will be impact on your credit. Chances are your credit score is already damaged because you’re behind in payments. If your credit score is still good, debt settlement will have a negative impact on it. The other thing is, during this process you won’t be able to get credit. Prepare to live on a “cash basis only”.
Sometimes you will need to move. Maybe you need to get car insurance. Do these things before you damage your credit score or get involved with a debt settlement program. As mentioned, once you get going in a plan like this your credit score will go down. Anything you wanted to do requiring a decent credit score will now be harder to do.
A debt settlement plan for credit cards usually range from 3 to 5 years.
The positives of programs like this is it shows lenders you looked for the best option for your situation. You didn’t avoid the problem, you faced it even if you had to use a debt settlement program to do it. This won’t be the total saving grace for your credit score, but it is a bargaining chip for better rates in the future.
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