You didn’t pay any mind before accruing massive credit card debt or did you? You found something eye-catching at the store and WHAM! you swiped your credit card flamboyantly to quench your thirst for shopping.
Now you have a colossal level of debt and the credit card companies mean business. They have messed up your life by giving you reminder calls and intimidating to sue you if you don’t pay your outstanding debt. “Credit card debt settlement is easy AF”, said no one ever.
What do you do now? Credit card debt settlement services seem like a last resort and rightly so. But before you take a leap, you should know what credit card debt settlement is in totality and how such companies operate.
Moreover, the process is much of a bumpy ride with lots of potholes. So, before embarking on a journey it’s always good to have an idea about your course.
What Debt Settlement actually is
Think of debt settlement as a truce between you and your creditor. There comes a point where credit card companies know that you aren’t in a state of paying all your debt.
So, they go by the theory of Something is Better Than Nothing and agree to settle your debt for an amount which is lower than what you originally owed.
For instance, you owe $10,000 on a credit card and you have been missing out on the payments since quite a while. Your creditor has reported your fail payments to the credit bureaus and it has started to show on your credit reports.
However, your creditor has agreed to settle the debt for a payment of $7000. Your creditor receives the payment in full on the agreed upon debt and pardons your debt of $3000.
Also, the creditor sends a report to credit bureaus stating that you have successfully settled your debt. Sounds simple, doesn’t it? There is more to credit card debt settlement than what meets the eye.
Is Debt Settlement a Mirage?
Debt settlement is not a scam and it’s a fully legitimate financial service. However, there are certain things that you should be wary of.
The best you can do is to do homework and know what all options you have to get out of debt. Most people don’t know that they can reach out to credit card companies to negotiate a lowered debt on their own.
If this is the case, you ought to ensure (before making payment) that you have in writing that the creditor has agreed to settle the debt.
Some people resort to debt settlement companies which negotiate with credit card companies on behalf of the debtor. In this case, you don’t have to face off with your creditors over pardoning a part of your debt.
Instead, you pay credit card debt settlement companies the agreed upon amount (alongside their fees), which they, in turn, pay to the creditor after negotiating the debt.
Signs to watch out for
But the debt settlement market is not a very friendly place. Predators often lurk in the bushes whilst targeting their kill.
So, it’s always necessary to watch out for shady businesses who prey on customers’ unawareness and feed them with falsified/fraudulent information:-
Here are some bad pieces of advice which fraudulent services will give you to trick you into buying their despicable services:-
You can’t walk alone coz you can’t rock alone
Some companies will pretend as if hiring them is the only way out of your debt. This is where you have to sniff the malice of the companies who are feeding you with wrong information.
Have no strings attached to your creditors
Some debt settlement companies will advise you to cut all ties with your creditors and withhold your payments entirely to save for the settlement amount instead.
This is particularly a bad move and can turn your situation for worst. The interest will keep on accruing on debt and credit companies can also sue you if they regard you to be absconding.
Pay that major chunk of money at one go
The FTC explicitly forbids debt settlement companies to receive the amount in full from clients before negotiating a lowered debt amount from their creditors.
You will steer clear of all your troubles
No one can promise you that your credit card companies will agree to receive peanuts against a huge pile of debt that you owe. I REPEAT NO ONE, DO YOU COPY?
The Potholes on the road of Credit Card Debt Settlement
Life is not all sunshine and rainbows and credit card debt settlement is no exception either. There are some costs attached to the process of debt settlement which you should be well acquainted with. Here they are:
Debt Settlement comes with a price
The dream of receiving no threatening calls from your creditors come with a price. The fee is generally a percentage of your overall debt and sometimes the percentage of your pardoned amount. 15-20% of the debt settled is the norm.
Credit score will continue to bleed for a longer time than you may think
Despite the fact that the creditor reports to credit bureaus that the account has been settled, it continues to show on your credit score. Sometimes, it takes as much as a few years before your credit score continues to resurrect.
IRS wants its share too
If your pardoned debt exceeds the mark of $600, you will have to pay taxes on the forgiven debt (Conditionally).
The settlement amount is not a cakewalk either
The idea of getting your debt pardoned may sound enticing but for that, you have to pay the settlement amount. Paying the settlement amount is nothing short of a daunting task which means even after taking the credit card debt settlement service you will have to climb a steep uphill mountain.
Credit card debt settlement companies to count on
Now that you know how to avoid becoming prey to scamsters in the market, here are a couple of debt settlement companies whose services are like an arrow which never misses its target:-
Freedom Debt Relief (FDR) is the pioneer debt settlement organization. Since its inception in 2002, FDR has settled more than $8 million in debt for over 450,000 which of course is a whopping number.
FDR brings in its vast experience of almost 2 decades and expertise to the table. However, what really makes FDR stand out from the lot is its easy to use customer dashboard which guides the customer through various stages of debt settlement. Also, the customers have the luxury of consulting debt management professional via the dashboard.
FDR has been in business for long and has got a good rapport with industry veterans across the verticals. This helps it in negotiating a lower debt for its clients. With FDR, credit card debt settlement is easier than ever before. Visit FDR and achieve financial independence.
|Fee||18% - 25%|
|Program Term||24 to 48 months*|
|Min Debt Amount||$10,000|
|Accreditation||AFCC and IAPDA|
National Debt Relief (NDR) is a debt settlement company with a difference. It’s not just another company which will pitch its services with agility, instead, it educates debt-laden people on how to get out of debt. This is the reason behind the huge growth of its cult following over the last few years.
NDR has a strong fabric of trust with its customers because it is very upfront and says that debt settlement is not a one size fits all kind of a solution.
It works closely with its customers to figure out different possibilities. This is why its reputation for transparency and fairness is fast becoming a legend.
National Debt Relief could be a good option for someone who is willing to negotiate small unsecured debt from his/her creditors. Want to be in safe hands through the debt settlement process? Look no further than NDR.
|Fee||15% - 25% of total debt|
|Program Term||24 to 48 months|
|Min Debt Amount||$7,500|
|Savings||30% after fee|
|Accreditation||AFCC and IAPDA|
Accredited Debt Relief (ADR) is yet another premium debt settlement company. Its USP lies in its critical analysis of the finances of its customers alongside their credit history.
This way, ADR is able to assess what kind of debt relief service would be in the best interest of the customer.
People go for debt settlement services like a mindless herd (without thinking of possible ramifications). Thankfully, ADR is not the butcher who is waiting to cut slit the throats of goats in the herd.
In fact, ADR goes the extra mile and craft a perfect debt relief solution which would not only help the customer fight off the debt but also help him/her in sustaining a healthy credit score.
ADR has got a Debt Relief Calculator on its homepage, which helps you calculate the amount which you would save with ADR negotiating on your behalf. This calculator is also a good indicator of your debt complexion. You ought to check it out.
|Fee||20% of total debt|
|Program Term||12 to 48 months|
|Min Debt Amount||$15,000|
|Savings||30% after fee|
|Accreditation||AFCC & BBB|
Alternatives to credit card debt settlement
When confronted with credit card debt, you might have more options (though not foolproof) than you think:-
Ignore the zombie debt
Every state in the US has its own regulation on debt collection. If you haven’t paid your credit card debt for years and have exceeded the limit, collectors and agencies can’t force you to pay the money. However, this could also mean that bankruptcy is on the horizon for you.
Follow a debt repayment strategy
Debt Avalanche and Debt Snowball strategy can help you get out of the abyss of debt. Know what fits your situation.
Balance transfer cards
Transferring high-interest debt to a balance transfer credit card will give you a zero percent rate for some period of time. Try targeting your debt during this time when the horses of interest are not taking a bolt.
Debt settlement can be a good way to get rid of unsecured debt. However, it’s important to know the implications of a negotiated debt. You should only make a decision after weighing various options.