Have you heard the term credit card settlement and wondered what it meant? If so, you’re not alone. While credit card settlement has become popular over the past few years, it’s still not something that most people understand.
Why credit card settlement?
Let’s suppose that you have $15,000 in credit card debt. You wake up every morning in a cold sweat hoping that your manager won’t be calling you into his or her office to tell you that your wages have been garnished. You’ve stopped answering the phone unless you can see that it’s a friend or relative calling because you’re afraid it will be one of the credit card companies calling to harass you.
How does credit card settlement work?
The idea behind credit card settlement is to get your creditors to agree to settle for much less than you actually owe. In return, you pay off the complete balance or settle your credit card debts in one lump sum. To make this work, you need to stop paying your credit cards for probably six months as it usually takes this long before the credit card companies are ready to talk settlement. And, of course, you have to have enough cash on hand to be able to pay off whatever it is that you and the credit card companies agree to.
In other words, getting back to the $15,000 in debt, you might be able to negotiate it down to $7,500 or less but you will need to have that much money available to pay off the settlement.
Why debt settlement can be successful
The reason why debt settlement works is that the credit card companies are no dummies. They know from long experience that if you are six months behind in your payments and they don’t agree to a settlement, you could decide to file for bankruptcy. In this case, instead of getting fifty cents on the dollar they would get zero cents on the dollar. Alternatively, they could turn your debt over to a collection company but it will take a large percentage of whatever it can get from you–if it can get anything. So, settling with you for maybe half of what you owe is a lot better than the alternatives.
Do you have the intestinal fortitude?
You do have to have a pretty strong personality to stop making payments on your credit cards for six months and then call the credit card companies and offer to settle for 50% of what you owe. This is why many people do not do their own debt settlements, they choose to hire a reputable debt relief company to do it on their behalf.
Why a debt settlement company?
Many families have turned to debt relief companies to negotiate with the credit card companies for them. A debt settlement referral company such as Debt Consolidation USA has years of experience negotiating with the credit card companies. Its debt counselors have personal relationships with many of the people at these companies. This makes it much easier for them to negotiate a better credit card settlement than you would be able to negotiate yourself.