When you overestimate your financial capabilities and realize there’s no way to keep up with your credit card balance, a settlement is a good idea. There are advantages and disadvantages, like with anything, but some people negotiate until they have to pay half the money if not less.
This is not always the case, sometimes the process isn’t successful at all. But if your credit card balance becomes a problem, professional counseling is worth a try. After all, credit card settlement wouldn’t be there if it wasn’t at least a little bit useful.
What’s the Credit Card Settlement Process Is
Here’s a brief explanation of the process, step by step:
You’re advised to stop paying installments;
The money you were about to pay the bank is transferred to an account managed by the company you hire to negotiate a settlement;
As months pass, you get more and more overdue notes from the bank, and this is when the company approaches them with an offer;
Oftentimes, both sides agree that you pay a lump sum one time to cover a part/half/almost all the debt, depending on the result of the negotiations;
You pay the money that you have saved by using the account managed by the company;
You optionally also pay taxes on the saved money;
You pay the agreed fee to the company.
As you can see, the company you choose to negotiate the settlement terms plays a huge role. Choose a team of specialists with good credentials and some real examples of their results.
FAQ on Credit Card Settlement
Does settlement work every time?
Not every time, but there are good chances. Either you will settle for 25%-80% of the initial debt or the lender will take you to court. It depends on the bank or private lender you owe to and the company you choose for negotiations.
Does the process impact my credit score?
Yes, because you have to stop paying your monthly installments. You can improve the score afterward by taking small loans and paying them back on time, though. But make sure you check it every once in a while to be sure you’re improving. Sometimes it may take a couple of years till you can apply for a loan again, but it’s the case if your score was low to begin with.
What is better: management or settlement?
Debt management is another way to get back on track and pay back your loans, credit card, etc. You don’t need a lot of help with this but it’s a good idea to consult a professional to make sure you’re doing everything right. First of all, calculate how much you owe, then see if you can cover the minimum payment every month and still live a normal life, and then pay consistently.
If you have difficulties at any stage, it’s better to ask an expert for help. Maybe a credit card settlement will be left as the only option that may help you.