How Credit Card Debt Settlements Can Save Money and Hassle
The problem with making good use of credit cards is that, more often than not, they end up creating a crippling debt. With as many as 5 credit cards owned by the average US cardholder, debts can run to as high as $50,000. The best solution in such cases is a credit card debt settlement program.
The challenge of repaying any form of debt is pretty tricky, but clearing existing card debt can be a significant accomplishment in its own right. If the total debt is around $50,000, then removing it makes a huge difference, but there is little doubt that some help is required.
Of course, as with all financial issues, there are terms and conditions to look out for. Choosing the right debt settlement scheme is vital if the true benefits that come with lifting credit card debt are to be enjoyed. But what factors need to be considered?
Understanding How Debt Settlement Works
The principles of clearing outstanding balances via credit card debt settlement are based on compromise. When a credit card company realizes the total debt will never be repaid, they are willing to agree to a settlement program to recover a certain percentage of the money owed.
For example, after some negotiation, the issuer and the cardholder may agree a 50% rate, which means that only half of the money owed is repaid. A $50,000 debt, therefore, falls to $25,000. So, by clearing existing card debt through the program, some serious savings can be made.
Of course, a key part to making such savings is the professional settlement negotiator that is hired to represent the debtor. A good one will lower the agreed sum to as much as 30% of the actual credit card debt.
Securing the Best Deal
There is a definite procedure when it comes to getting a debt settlement program. It is not enough to call up your credit card company and ask for negotiations to begin. The starting point is to refuse to make repayments, thereby establishing the fact that the total debt cannot be repaid.
Remember that the creditor wants to get the maximum amount possible, and avoid making losses that are too high. If they know a larger percentage can be repaid, then they will insist on it, which only works against your aim of clearing existing card debt with the lowest sum paid.
Also, remember that a settlement program is a voluntary option, so a creditor can withdraw from negotiations at any stage and opt instead to begin legal proceedings. This all highlights the need for a good settlement negotiator, who knows how to secure the best terms for clearing the credit card debt as possible.
Other Matters to Consider
There are a number of other matters to bear in mind before finalizing a credit card debt settlement program. The first is that it takes time to secure this kind of deal. Usually, it is necessary to leave the credit card bills unpaid for at least a period of 6 months, after which negotiations can take a number of weeks.
Also, clearing existing card debt in this way often means making a single settlement payment, though this depends on the debt involved. If installments are agreed, they will be large monthly repayments too. So ensure the necessary funds are available.
Finally, do not expect to clear your credit card debt through a settlement agreement and not have it affect your credit rating. It will stick to your credit record for 24 months, though this is much more desirable than the 10-year period bankruptcy affects ratings.