How does Credit Card Debt settlement works:
Pros and Cons
Credit Card Debt Settlement – Many people fail to realize how quickly and how easily debt can overcome an individual or family.
While some realize that debts can grow out of control, others are surprised by the amount of debt that they find themselves into.
Those who are dealing with an overwhelming amount of debt often turn to a debt settlement as a rescue for their debt problems.
Debt settlement is not going to be the right move for everyone with credit card debt.
Individuals need to understand the positives and negatives of a debt settlement to understand whether or not this is the best option as they attempt to become debt free.
Failure to do so may make things financially worst for you than it presently is.
Below are some of the major pros and cons of debt settlement you need to consider before committing yourself to any debt settlement lawyer, attorney, firm or companies out there.
Advantages of Credit Card Debt Settlement
- Reduced Debt Amount and Better Debt Terms
Debt settlement will allow you to pay credit card payments on your own terms, and will allow you to remove a large portion of the debt that you do owe.
Many will find that the amount of debt that they have can be reduced by 30-50 percent or more.
- Better Credit Score.
Some will actually see more than this, getting a drastic amount of debt removed from their credit score.
- Fast Track to Being Debt Free
Those who go through the debt settlement process are often debt free within two or three years of the initial settlement.
You may see a boost in your credit report thanks to the way that the company handles your debt.
They may change your debt from overdue to current, which will immediately help your credit score.
- Better Credit Terms
Credit card debt settlement allows you to enter into an agreement with the company that you owe the money to.
As long as you stick to your settlement, the company cannot send your debt to a collection agency.
This helps to keep your debt out of the collection agency, which will help your credit score.
Disadvantages of Credit Card Debt Settlement
- Credit Score Reporting
Debt settlement is still going to have a serious negative effect on your credit score, as you will still remove poor marks.
Your credit score will go down until the company stops the negative reporting – which may not happen until months after you have started the settlement process.
Settled debt may also appear on your credit report as “Settled”.
This is different than “paid in full”, as the debt was never paid in full.
While some companies may wipe this off of your credit report, others will keep it on your record.
This will affect your credit score for a decent amount of time.
A way round this is to have it include in your debt settlement negotiation terms. Discuss with the debt company and insist that the debt be reported as “paid in full” based on the full payment of the agreed upon debt amount.
Think about both the positives and negatives of a credit card debt settlement.
This will help you to better understand how the system works and how it may or may not help you and your debt.
If you are still somewhat uneasy about credit card settlement and your situation, talk to a financial specialist about your debt credit cards settlements options.
They will be able to talk to you about credit card debt settlement and will be able to help you figure out the best course of action.
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