Credit Card Debt Settlement: Pros and Cons
Credit Card Debt Settlement: Pros and Cons
Do you admit that you have a serious problem with shopping and will buy everything that catches your eye? A pile of useless junk will undoubtedly accumulate as a result of such unthinking and impulsive purchases. When the silk scarf was marked down to half off, you had to have it. Do you recall buying it? Tell me where you put it and how often you wore it. Is it a current trend?
In order to find that once-prized scarf, if you're like most people, you'll have to sift through piles and piles of shopping "litter" amassed over the years. You may still be in denial if you believe that "fashion goes round and round, and that scarf will have its shining moment once again."
Many people, sadly, get into the habit of making purchases they truly can't afford on impulse and end up in debt as a result. If you find yourself in this position, you'll need to familiarize yourself with debt settlement strategies to help you climb out of your financial hole and put yourself back together again. And now is the time to begin! Naturally, you need to be truthful with yourself, confess that you have a significant debt problem, and then be humble enough to seek the help you need to get yourself out of this debilitating nightmare.
First things first, many people may believe they have few options for dealing with their debt. People who have amassed substantial amounts of debt sometimes weigh the alternatives between bankruptcy and debt consolidation. However, filing for bankruptcy is an easy way out that leaves an embarrassing and permanent mark on your credit report for up to 7 years, leading to higher interest rates, less credit, and possibly not qualifying for a mortgage (although some lenders do give loans immediately after bankruptcy). The typical loan-to-value ratio for a primary mortgage is 80%, with a second mortgage (if available) accounting for the remaining 10% at a significantly higher interest rate and requiring a 10% down payment.
Obviously, you'll have to pay more for everything for a while if you go the debt consolidation route, but you should weigh that option against simply paying off your debt. However, if you establish that you will continue to make payments each month until the rest of the debt is paid off, the collection agency may be willing to forgive between 25% and 50% of the obligation.
Credit card companies were early investors in several debt settlement and consolidation firms. You may be wondering why credit card companies would go to such lengths to assist you in paying off your debt when they stand to lose all or a portion of what is owed to them if you file for bankruptcy. If you were in their position, what would you do? Simply put, it's common sense. Because of this, debt settlement is being given to a large portion of the population. Credit card firms may own some debt consolidation service organizations, although this is not always the case.
Debt arbitration programs are provided by a few organizations. The "selling point" of these options is that debt settlement will help you get out of debt without filing for bankruptcy, without paying exorbitant fees to a debt consolidation program, and without falling into the trap of consolidating your debts with a loan shark.
Businesses that provide this service typically negotiate reduced payments with the collection agencies handling your case. I recommend making multiple calls to different businesses to find one with which you are comfortable and that doesn't overcharge for their services.
However, if you are already in a lot of debt and would like to save some cash, it makes sense to bargain directly with the collection agency. Rather than getting angry about the constant phone calls, simply explain to the collection agency representative that you would like to pay off your debt but that you will only be able to do so if the amount you owe is reduced. You can even ask for a reduction of as much as 75%. Start with a high asking price because every negotiation involves some degree of give and take. Because they only get paid when they collect, and because it's better to get their percentage on a smaller amount than "diddly squat" on the full amount, you may rest assured that they will go to work for you and give your offer considerable consideration.
Of course, you'll have to weigh your options before making a final decision between bankruptcy and debt settlement. Be wary of companies advertising bankruptcy or debt settlement services online, and avoid working with anyone you don't feel completely at ease with.
Post a Comment for "Credit Card Debt Settlement: Pros and Cons"