Credit Card Debt Settlement: Is it Your Best Option?

in Money

The obvious benefit of credit card debt settlement is that you’re out of debt, at least on the card or cards that you settle. If you settle all of your credit cards, then you’ll no longer have to pay the crippling interest, late fees and over-the-limit fees that can quickly send your balances skyrocketing out of control. You’ll have more money to save, spend or pay on other debts because you’ll no longer have to make those huge, monthly credit card payments.
The deeper in debt you are, the more attractive credit card debt settlement probably sounds. But it’s important to understand how it can affect you and your credit in the future. You may discover there are other options that are a better solution to your problems.

Other Debt Solutions

First of all, if you’re not behind on your payments, you’re not in a good position for credit card debt settlement. If you’re keeping up every month but you know you need to get out from under your debt, you should look into other methods of paying your balances down. A credit counselor can look at your budget and your debt and help you come up with a financial plan that fits your lifestyle.
A credit card debt consolidation loan works for many people because it can give you a much lower interest rate. Credit card consolidation simply means that you’re loaned an amount large enough to pay off all of your credit cards at once. Then you make one monthly payment on that loan, which is often a much smaller amount than all of your previous credit card payments combined. Only choose this option if you plan to avoid using your credit cards as much as possible while you’re paying the loan. Some people let their debt creep back up and then they have the loan to pay off as well as new, large debts on their credit cards.
If there’s simply not enough money and you know you’re headed for trouble, a credit management plan allows you to pay the management organization and then it distributes payments to your creditors. They will negotiate your balances and interest rates to lower them as much as possible. This option can negatively affect your credit score, so you don’t want to go this route if your credit is currently in good shape and there’s a possibility you can keep it that way.
By far, the best way to handle your credit card debt is to pay it down as quickly as possible. An extra part-time job, cutting back on other expenses and applying the money toward your debt, and even perhaps selling things you can part with to pay down your debt, are all options. When there’s nothing you can do to help get those balances paid, then a debt settlement program may be your best option.

Credit Card Debt Settlement Consequences

Be aware that there are consequences aside from the lovely feeling of having your debts paid. It will negatively impact your credit score and can make it difficult or impossible to get loans and other lines of credit for a while. And you won’t be able to use the credit cards you’ve paid because those are closed as part of the credit card debt settlement agreement.
Examine all the options and do what you can to avoid a settlement. But when it’s clearly the best way out of a bad situation, then it’s worth the possible problems later on. But really look at your financial health to make sure you don’t end up under crushing credit card debt again.
You can call your credit card companies and ask for a settlement, but you’ll almost always get better results if a lawyer or a service makes this contact instead. The companies will take the situation more seriously because they realize you’ve probably already discussed bankruptcy and know your options, so they’ll be more willing to give you a better deal.

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