Credit Card Debt Settlement Services

Struggling with large amounts of consumer debt is nothing new in this country. Generally people who use credit cards begin with the end in mind, meaning, they calculate how much to spend according to how much they figure they can pay on a monthly basis. This works as long as no unforeseen events ruin the plan; events such as late fees, changes to interest rates, and loss of a job. When this happens, people have to consider serious solutions.

DEBT CONSOLIDATION

One attempt to settle credit card debts which people turn to is consolidation. This is where the debtor attempts to consolidate several credit card, and other consumer debts, into one single loan. The initial idea is that by bringing all the debts into one, low interest debt, the monthly minimum payment will be less, and therefore easier to make. Assuming that you can obtain a low interest rate loan (or credit card) with enough free credit to consolidate all your loans together, this idea has some merit. The problem with this solution is that you end up barely able to make minimum payments which over time cover only interest and very little principal. You could end up paying your original debt amount over 5 to 6 times before ever paying it completely off.

CREDIT COUNSELING

Credit counseling services do a good service especially if they are non-profit. Here you make a single payment to the service (the amount might be the same you are currently making to all your creditors plus) and they disburse your payments to your creditors for you. In exchange, the counseling services might be able to get your creditors to lower the interest rates on your accounts. You pay back the full amount you owe, plus interest, but at a lower interest rate. One potential draw-back is that if you miss a payment you can be removed from the program and be unable to reapply for as long as a year and end up back in your former situation with the higher interest rates. Because of their strict program structure, close to 75 percent of the people who enroll in these services fail to complete the program.

BANKRUPTCY

Filing for bankruptcy is another way to handle consumer credit card debt. The problem of course is that it ruins your credit for years. You may also stand to lose certain property and assets you'd rather retain in order to settle debts.

DEBT SETTLEMENT SERVICES

Debt settlement services are good alternative to bankruptcy, and in many cases the other options listed above. These agencies are generally also law firms that specialize in negotiating with creditors. They can quite often get your creditors to settle for up to 70 percent off what you owe them, and eliminate or reduce your interest rates as well. You do pay them a fee for their service, but if you contact a good agency you still come out ahead. Remember that before credit agencies will consider negotiating the principal down, you need to be delinquent in your payments. This too will harm your credit rating, but it will easier to recover from than bankruptcy.

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