Credit Card Debt Solutions

If your credit card debt is spiraling out of control perhaps it's time to take a look at some solutions that could benefit your situation. The bad news is that you will have to make some changes in the way that you are doing things. The good news is that you can settle or eliminate a substantial portion of your credit card debt using the methods described here.

 

 

 

Settle Your Credit Card Debt - No Monthly Fees

If you are at the point that making minimum payments on your credit card debt is a burden or your payments are falling further behind every month then it may be time to look into a debt settlement program.

Debt Settlement is primarily used to negotiate better terms on the following types of debt:

• Credit Cards
• Medical Bills
• Loan Deficiency Balances
• Gas Credit Cards
• Retail Charge Cards

When payments to unsecured debt falls behind lenders can raise interest rates to a level that makes paying off the account nearly impossible.

Credit card debt management can enable account holders to settle their account for a fraction of the total amount owed.

How Debt Settlement Works

Debt settlement is the process of negotiating a lump sum payment to your lender that will result in their agreement to consider your debt paid in full.

Unfortunately most lenders will only consider debt settlement as an option if the borrower has become seriously delinquent in their payments. As a result debt settlement is not a process for those that are trying to maintain a good credit rating. It is more of a benefit to those that would like to settle their debt properly and finally through the process of negotiation.

Accumulating Your Settlement

Consider it just part of the process. It is their job to attempt collection and yours to accumulate enough to settle the debt in the future. It requires time.

The Details Make A Difference

When the debtor has collected sufficient funds they will be able to offer the lender or collector a lump sum settlement to cancel their obligation through the settlement.

This should be done in a legal and binding manner to insure that the settlement is not just applied to the balance and that the debt is canceled in full.

How the settlement is reported to the credit bureau can also make a difference in the borrower's future credit score. Forgiven debt may also incur tax liability.

Choosing A Debt Settlement Company

Many companies offer debt settlement services but there are only a few that fall into our category of "consumer friendly". To qualify a company must meet the following guidelines:

Monthly Maintenance Fees

Maintenance fees reduce your settlement accumulation on 1:1 basis. For every dollar that you pay in monthly maintenance fees you lose a dollar of settlement fund strength. You will be dollars ahead by choosing a company that does not charge a monthly maintenance fee.

"Front End" and "Back End" Fees

Front end fees are fees charged by the debt settlement company that are paid out of the first dollars invested rather than an equal percentage through the deposit period.

Back end fees are those charged at the time of settlement. Both of these types of fees can hinder our success both in the accumulation and settlement phases of the process.

A fixed percentage subtracted from your settlement account deposits over the life of your accumulation phase is the easiest and least costly way to pay your settlement company. This method provides no roadblock to debt settlement at the beginning or the end of the process.

Who's The Boss?

From the beginning you should know that the company that you decide on is working for YOU. There are many services that claim to work in the best interests of their clients however they are funded by and receive compensation from lenders.

Those organizations that volunteer to settle your debt free of charge cannot operate without income from some source. Make sure that the debt settlement service that you choose is working for you not the lenders.

The Next Step

The next step is taking some positive action on your behalf. The worst thing that you can do is wait for the problem to go away. The best thing that you can do is start now to rebuild your finances and credit.

Lower Your Payments - Keep Your Credit Intact

If your unsecured debt payments have become unaffordable but you want or need to preserve your good credit rating then debt management may be a the solution for you.

For many people a good credit rating isn't optional. Employment, participation in the operation of a small business, bonding requirements, or public service can demand that your credit rating remains intact.

Debt management involves negotiating with a creditor to reduce the interest rate of the loan in order to make payments more affordable.

In many debt management situations the debt is converted to a fixed rate for a fixed period of time. Most of the time the credit line is closed voluntarily by the borrower.

The advantages of debt management are:

• Reduced Payments
• Collection Calls Stop
• Debt Is Retired Early
• Credit Rating Is Retained
• Late Fees Are Eliminated
• Over-Limit Fees Are Eliminated

Debt management can reduce your payments and literally save you years of payments that you would otherwise make.

How Debt Management Works

Debt management is the process of negotiating with a lender to change the character of a debt from an open charge account with fees and high interest rates attached into a fixed rate and period loan.

You may pick and choose the accounts that you want to reduce your payments on rather than bundle all of your debts into one program.

Choosing an experienced negotiator is the key to success when attempting a debt management solution.

The process of negotiating a debt management solution can take from a week to a few months depending on your lender.

Debt Management Fees

Unlike debt settlement, debt management does not require an ongoing fee. A fee is typically charged on a per account basis upon retaining a credit counselor/negotiator.

Fees for debt management usually amount to a small percentage of your savings and are paid on a one-time basis rather than over time.

Do They Belong To Their Local BBB?

Checking with the provider's local Better Business Bureau can give you some insight as to the company and if it deals fairly with the public. While most companies that have been in existence for a while will have a few complaints, the key really is if and how those complaints were resolved.

Do They Adhere To Industry Standards?

Most industries have a standards organization the accepts members that are willing to follow practice guidelines.

The Debt Settlement industry organization is TASC (The Association of Settlement Companies). The Debt Management industry association is AADMO (American Association of Debt Management Organizations.

You Deserve An Explanation

When you contact a debt settlement or management service they should be willing to explain their service completely and evaluate your situation as to whether their service can be of benefit to you.

You should not feel pressured or obligated to participate in their program as a result of the evaluation process.