There are times when you may feel like you’re drowning in credit card debt. It seems like the minimums are always higher than what you can pay, and one late payment can send your interest rates skyrocketing. Settling credit card debt isn’t the first thing that people think of when they want to get out of debt.
It’s an intimidating thought that the people who loaned you money can come after you to take it back. But, there are times when settling credit card debt is the best option for your situation. So if you get caught in such a scenario, don’t hesitate to look for an appropriate credit card debt relief program.
What is Debt Settlement
Debt settlement is when you negotiate with your creditors to lower the amount that you owe on an outstanding credit card balance. You might have little or no hope of paying off that debt, but by settling the debt, you avoid bankruptcy and damage to your credit score.
When you first begin negotiating with a creditor, you should find out whether they will accept a settlement. Some creditors won’t settle for anything less than the full amount, while some may be willing to negotiate and allow you to pay off only a portion of what you owe.
Who Offers Debt Settlement
There are third-party companies, such as the type you’ll find at https://www.freedomdebtrelief.com/, whose business is to contact your creditors to negotiate on your behalf. These companies offer debt settlement for credit cards, medical bills, and other debts.
Make sure that the company or agency you choose to represent you has all the proper licensing and certifications for this type of service. Also, make sure they are members of the Credit Services Organization or accredited by an organization such as the American Fair Credit Council. AFCC. These organizations provide standards by which debt settlement companies must abide.
Why Bother With Debt Settlement
Once a debt has been turned over to a collection agency, it becomes an even greater burden on your shoulders. The longer that the debt remains unpaid, the bigger the balances will get due to mounting interest.
If you’re getting calls every day from collectors, your debt may already be in collections. It can be difficult to keep up with minimum payments when you keep getting these calls about money that you owe. Sometimes, the only way out is to negotiate a settlement on the debt so that it’s no longer an issue for you.
What Are the Benefits of Debt Settlement
Many people who choose credit card debt relief normally enjoy some or all of these benefits:
Avoiding Bankruptcy: Bankruptcy is a black mark on your credit report that can stay with you for up to 10 years. Settling the debt instead of filing for bankruptcy keeps your good credit history intact.
Pay a Lower Amount Than Owed: Since most people don’t have the money to settle the full amount, settling for less is a great option when negotiating with creditors or debt settlement companies.
Pay Less in Interest: When your bill gets handed off from one creditor to another, it may end up with a high-interest rate. Settling the debt means that you only have to pay the reduced balance instead of all of the extra fees and charges that go along with your original bill.
What To Do if Your Creditor Settles Your Debt
If the creditor agrees to negotiate, make sure to get all of the details in writing, including the new amount that you owe. You’ll then need to pay the agreed-upon settlement amount. Your settlement agent will take care of these details, once you agree to the renegotiated terms.
Summing Up
Keep in mind that using debt settlement tactics may damage your credit score in the short term. On the other hand though, if debt settlement is a viable option, your credit score is already diminished. You’ll want to look into all of your options before making any decisions about how to manage debts. If you’re still not sure if settling credit card debt is a good idea, then you should talk to a credit counselor. They can help you figure out the best plan for your financial future.