A Credit Card Settlement Plan Helps You to Pay-off Your Debts

Credit card settlement can help you to reduce the principal as well as making repayment more affordable. Credit card debt is an unsecured form of borrowing which means that, unlike failing to pay your mortgage, creditors have no asset to take from you in the event of default. Whilst card providers and debt collection agencies will pursue you for repayment, their powers are far more limited. This means that they are more willing to negotiate with respect to how debt is to be cleared. This has led to a growth in debt Solutions, such as the debt settlement program.

What is Credit Card Settlement?

A debt settlement program involves a financial professional negotiating with your creditors to change the terms of how any debt will be re-paid. Whilst nothing is set in stone, it may be possible to reduce the principal by up to 50%. This means that an affordable repayment can be made over a period of 12 to 36 months. It is possible to extend the term, but this is not recommended. The shorter the term, the greater the likelihood that a creditor will be agreeable to your offer.

Front-loaded fees

Avoid debt settlement programs that take their charges up-front. This practice increases the amount owed which creates problems should you decide that this debt solution is not for you. It also increases the likelihood of creditors becoming restless and pursuing legal action against you. This is because most of your payments will just be paying management charges for a number of months. It is important to only sign-up to a plan where fees (that are typically 15%) are taken as they are paid in each month.

Unethical practices

Not all providers are bad apples, but some are. Check with the Better Business Bureau to find out what other customers think of the debt settlement company you plan to deal with. Has there been any negative feedback? Only deal with established providers that have the highest ratings. Talk to family and friends to find out if they have any experiences to share with you.

Extending the term of Credit Card Settlement Plans

Whilst increasing the amount of time debt is paid over is attractive because it reduces the amount paid each month, it is not advised. Try not to increase the term of a debt settlement program beyond 36 months. A longer term than this means that it is less likely that a creditor will agree to the debt solution. Some creditors will agree and belatedly take legal action against you to recover the debt.

Credit card settlement is an excellent way of clearing unsecured debt. However, the debt settlement company you deal with is fundamental to the success of this debt solution. Do your research, avoid front-loaded fees and keep the repayment term as short as possible.

Disclaimer: This article in no way attempts to provide legal, financial or tax advice. One should consult a licensed attorney, tax advisor, or other qualified financial professional before proceeding.

Disclaimer: This article in no way attempts to provide legal, financial or tax advice. One should consult a licensed attorney, tax advisor, or other qualified financial professional before proceeding.