When using your credit cards, always keep in mind, that they should be used sensibly and with lots of thought and respect. If, accidentally, you have built up a huge debt amount on your credit card that needs to be paid off, it advisable to make plans for immediate clearance of the outstanding due. The best possible way to do so is to go for a credit card debt settlement.
What is Credit Card Debt Settlement?
Credit card debt settlement is also regarded as an emergency damage control technique, which can effectively free you from credit card dues. The consequences of this particular technique would entirely rely on your negotiation skills. As per this credit card due clearance technique, you first need to get in touch with your credit card firm, whom you need to explain the reasons why you won’t be able to make the repayment as well as pay the high interest rates.
All credit card organizations are aware of the fact that if a defaulter or a credit card owner is on the verge of bankruptcy, then there is always a sound possibility of them losing the complete debt amount. Therefore, with the intention to avoid such type of risks, the credit card organizations prefer to negotiate and work out for something, which will prove to be beneficial for both the parties.
Credit Card Debt Settlement Pros & Cons
Like all other systems, a credit card debt settlement also has its own set of pros and cons. Some of the most important pros associated with this debt settlement technique are;
- The first positive aspect of a debt settlement is that your interest rates as well as your monthly payments get considerably reduced. This will prove to be advantageous for you as it will significantly lessen your financial liabilities.
- Secondly, this technique can assist you to settle all your dues in one single go. At times credit card companies ask credit card owners to make a final settlement, by paying a lump-sum amount, which is an extremely good offer.
- Some of the important negative features of a credit card debt settlement are;
- It is always better to take the help of a professional credit counselor to handle the negotiation portion, since often credit card companies tend to cite interest rates, which might prove to be beneficial for the company and not for you. However, the problem with credit counseling firms is that they tend to charge excessively.
- Often it has been found that when a person chooses to go for a longer payment duration and reduced interest rates, in order to get rid of his credit card debts, there are possibilities of him landing up in paying in excess of the actual loan amount.
Why Choose Credit Card Debt Settlement
The two most vital reason for choosing credit card debt settlement option is to avoid the chances of legal action and avoid ruining your credit. Legal action might be taken by the credit card companies or collection agencies, in order to retrieve the complete balance from the creditor. If a legal case is filed against you then there are chances of your financial life getting completely ruined.
Credit card companies will often times hire collection agencies like First Source Advantage and First National Collection Bureau (some of the larger collection agencies in the country) to recover any outstanding debt. Once collection agencies get involved, your credit score will suffer and the “harassment” by these companies will begin. You want to avoid this at all costs by being proactive and working directly with the credit card companies to get relief.