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Dealing With Credit Card Debt

Dealing With Credit Card Debt

If your credit card debt has taken on a life of its own, you do have company. In fact, the average debt per family is $6,270. That’s quite a bit of swiping. The good news is that when dealing with credit card debt, you do have options, including debt settlement. Let’s look at that financial strategy.

What is Debt Settlement?

Also called debt relief, debt settlement involves paying a company to negotiate with each of the companies you owe. These are typically credit card issuers. They aim to get them to allow you to “settle” your debt with a one-time payment in full of less than what you owe. The strategy usually works because creditors know your condition and that a likely, otherwise bankruptcy filing would probably net them zero.

What’s the Debt Settlement Process Like?

You contact a company like Freedom Debt Relief, which will go over your finances with you and come up with a plan. After the consultation, you’ll be asked to deposit cash each month into an escrow-type account. This is what will ultimately be used to pay your settlements. Once you’ve saved enough – the amount will be determined by how much you owe and your income – your company will begin negotiations with your creditors. They will be using your savings account as leverage. Following each settlement and approval by you, the creditor will be paid. Then that debt will be labeled as “settled” on your credit reports.

Will Debt Settlement Damage My Credit?

The debt settlement process, which calls for you to pay your creditors indirectly, and at length, will depress your scores. However, this is only temporary. Once your debts are settled and you’ve built your credit back up, your scores will improve. This is also a good time to remind you that your scores aren’t the greatest right now anyway. Right?

How Much Will Debt Settlement Run Me?

You can expect to fork over between 15% and 25% of either your enrolled debt or your settlement total. Make sure you find a credit debt relief company that is transparent about its pay structure. This will show you what you’ll likely end up paying.

What Kind of Debt Does Debt Settlement Cover?

Fortunately for you, debt settlement companies mostly handle credit cards. They also handle other kinds of unsecured debt. These are usually obligations not attached to collateral such as a house or car. For example, personal bank loans or medical bills.

Will Debt Settlement Take a Long Time?

Everything is relative, right? It took quite some time for you to go from managing your debt to drowning in it. Having said that, debt settlement usually takes between 24 and 49 months, although your first settlement will likely come within months.

It’s also good to remember that, should you choose to get rid of your debt yourself, through minimum payments, that would literally take forever.

How Can I Avoid Scams?

Unfortunately, there are some cheaters out there that care more about pocketing your cash than getting you out of debt. Be sure you pick an accredited company that doesn’t break the law by charging you upfront before any of your debts are settled, or that “guarantees” that it can save you a certain amount of money by a time certain. While debt settlement has helped scores of people like you get back on track, negotiations by their very nature are unpredictable.

The bottom line is, when dealing with credit card debt, debt settlement is a proven strategy. If you can’t see yourself getting out of debt within four or five years, even with extreme belt tightening, the approach may be for you. Just be sure to choose your settlement company wisely.

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