Credit card debt settlement is a way to settle your credit card debt in a shorter time than would otherwise be possible. This is done via special programs run by debt settlement organisations that liaise between you and your creditors to secure not just a reduction in your payments, but in your overall amount of debt before you even start.
This is not a route for anyone who just has a credit card debt they would like to see the back of. If you are able to clear your debts, even if that takes some time, you should do so, or you will do some damage to your credit rating.
The kind of people who a credit card debt settlement package is suitable for are those who have such a level of debt that are on the brink of financial collapse. This can be the last stop before bankruptcy. Bankruptcy does not benefit anyone, including your creditors, who will be ordered to cease pursuing you for the debts you owe and to write them off. This is the reason that debt settlement works. Your creditors would rather have a smaller slice of a pie than see the pie vanish from the table altogether.
Reductions with a credit card debt settlement range from 40% to 60% of the original debt, which is a significant and immediate improvement in the debtor’s situation. The whole process to final clearance of the debts can take from twelve to thirty-six months depending on the size of the debt and the deal worked out between debtor and creditors, which is a faster route than debt counseling where the amount is not cut, rather the whole debt is spread over a longer period with lower monthly repayments.
The debt settlement company will work on your behalf to arrange a reduction in your debts with your various creditors. Once an agreement is reached, and everything is confirmed in writing by all parties, a set amount is deducted from your account every month, and this will include an organisation fee. This amount is then split between your creditors.
If you are thinking of looking at a credit card debt settlement organisation, be wary of a few points.
- Make sure they do not charge high fees up front, or any high ongoing fees, however these may be disguised.
- Be sure to read all the terms and conditions before providing them with your financial information, handing any money over or signing anything. If they are not totally open about how they operate, walk away.
- If you do sign with anyone, make certain your creditors have accepted your proposals in writing before depositing any money in a dedicated debt management account.