Accumulating credit card debt can be very stressful, especially, when you start falling behind on your monthly bills and the creditors start calling you for payment. This is when you need help with credit card debt.
Debt settlement is one way to eliminate your credit card debts. People, who owe huge amount on cards and on which they can’t even make the minimum payment, may find debt settlement a great option. However, it has its pros and cons too. You would need to make yourself aware of both its advantages and disadvantages to make an informed decision.
Benefits of settling your debts: 1) Getting out of debt: You can eliminate your debt faster than the time it would need if you only make the minimum payment on your cards. 2) Lowers your debt amount: Settlement may offer help with credit card debt by reducing the amount you owe to the creditor. You may successfully reduce your debt by 60%. 3) Further, if the negotiation part is handled well, you can get your interests and late charges waved off too by the creditors. 4) Stop harassing calls: If you have hired a debt settlement firm to negotiate on your behalf, they can also put stop to the harassing collection calls. 5) Alternative to bankruptcy: Damages are more severe with bankruptcy and debt settlement can help you avoid filing for bankruptcy.
However, debt settlement may also have some negative effects. Following are its disadvantages. Disadvantages of debt settlement 1) Since you would be paying far less than what you owe to the creditor, debt settlement is likely to have an effect on your score. 2) As the creditors, by law, can report the status of the settled account as ‘pay as agreed’ or ‘settled for less’, it may affect your future possibilities of getting loans. 3) The IRS would consider the forgiven debt amount as your income and you may acquire tax liability on the saved amount. 4) Debt settlement is a proven way which provides help with credit card debt to people who have already defaulted on their credit card accounts, however, if you are concerned about maintaining your score; you may consider other alternatives.