Credit Card Debt Settlement Myths You Must Know

By  USDR

Confronting a financial breakdown or crisis due to overdue debt could be a pretty terrifying situation. Under such circumstances, it is quite natural for you to buckle under pressure and feel tempted to do anything necessary for moving on. Unpaid balance and late payments could be impacting your credit score negatively. In such a situation, any debt settlement arrangement could look like an attractive proposition. From the creditor’s perspective, it is much better to get back, at least, some of the outstanding debt than getting nothing. As far as, you are concerned credit card debt settlement could be damaging your credit profile but it gives you an opportunity to move on and initiate the rebuilding  process.

When your finances are down and job prospects are pretty bleak, it is quite obvious that you would be lured by tall promises made by debt settlement advertisements. However, you must realize that debt settlement could be fruitful provided you understand the true implications and are not swayed by debt settlement myths. You must be capable of differentiating between debt settlement truths and the existing myths. We would be discussing some of the most glaring debt  settlement myths here.

Myth: Anybody could get his/her credit card balance slashed in half for whatever  reason.

Reality: Both the creditors and the authorized debt settlement firms would be strictly screening clients to confirm their hardship is meeting underwriting criteria. Debt settlement is not for any and everybody to appease their whims and fancies. Debt settlement is meant for hardships like medical emergencies, temporary job loss, overspending, or even divorce. Browse the Internet and read reliable debt settlement reviews for getting a clear perspective on debt settlement  facts.

Myth: I need to pay upfront and the debt settlement firm would be controlling my  money.

Reality: As per the Federal Trade Commission 2010 rule, debt settlement firms have been banned from charging any advance fees from their clients before reducing or settling credit card debts or any other unsecured debts. This rule also specifically states that the client’s money that has been kept separately for paying the debts, should be maintained accurately in an account at any insured financial agency or institution. The consumers have complete controlling rights over the funds and they are entitled to any interests accrued. The debt settlement firm would be having no control over the  money.

Myth: Debt settlement would not impact my credit  score.

Reality: Debt settlement could be hurting your credit score almost to the same extent as would bankruptcy. However, simply asking for debt settlement would not be impacting your credit report negatively. If you succeed in getting a debt settlement or if you skip payments, then your credit score would be impacted adversely. Settlements, defaults, and other similar events do not impact your credit score provided they are not reported. Usually, they are reported and so they have the potential of damaging your credit  report.

Myth: Bankruptcy and Debt Settlement are my only choices when I cannot  pay.

Reality: No, the fact is, you are always having options. For instance, in the event, you have lost your job and you contact your credit card firm, it is likely that they would grant you forbearance. This implies that you are allowed to make no payments or maybe smaller payments for a  while.

If it is about time you got all your finances under control, you could seek assistance from any nonprofit credit counseling agency that could be assisting you in looking at the bigger picture and seeing all your available options, right from downsizing to boosting your income or efficiently managing your  budget.

Every individual’s situation is pretty unique and there is no cookie-cutter approach that is suitable for one and all. Some individuals are better suited to credit counseling while others find bankruptcy more suitable. Debt settlement could be a fantastic debt resolution option mostly for individuals who are struggling to make the necessary payments and those that would be requiring more than simply budget and educational advice. Debt settlement works well in cases where the principal reduction is the  goal.

Myth: With debt settlement negotiation, you would be out of all your pending  debts.

Reality: Some of your debts actually do not qualify for settlement negotiation. You cannot opt for debt settlement in case of taxes owed, student loans, alimony and child  support.

Conclusion

Credit card debt settlement could be effective provided you know your facts and you are able to distinguish between the myths and the realities. It pays if you devote some time to research and educate yourself adequately about debt settlement, how to go about it and the likely repercussions. You could seek professional assistance if you are not so sure of the debt settlement  facts.

Author Bio: Walter Baron is a financial consultant and blogger, specializing in debt settlement, loan and credit management, and investment tips. He is an avid blogger and he takes great delight in sharing his knowledge and experiences with his  readers.

 

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.