Debt Settlement Pros and Cons - North Carolina
Are you a resident of North Carolina who has fallen into the credit card debt trap and are now wondering about the pros and cons of debt settlement or some other form of debt relief? If so, and you want a proven way out of debt, then you are like many consumers these days who are, unfortunately, in a similar situation.
To find out how debt relief can help you pay down your debts, request a free debt relief analysis and savings estimate. Start today.
If you are no longer able to make your credit card debt payments due to any number of reasons like unemployment, rising medical costs, or a personal hardship - there is good news! A wide array of debt relief options are available that may help you - including debt settlement, debt consolidation, or even bankruptcy.
Typically, with debt settlement, consumers are hoping to negotiate, or "settle," with credit card companies for substantially less than what they actually owe. In contrast, debt consolidation typically involves combining high-interest credit card debts and other unsecured debts into one, more structured, and more manageable payment plan made to a credit counseling agency.
Both of these options are certainly associated with their own set of pros and cons, particularly in regard to how they might impact one's credit. However, these days, many consumers have made debt settlement and debt consolidation popular alternatives to bankruptcy, which is also a form of debt relief, but which has a longer lasting and more damaging effect on personal credit.
What You Need to Know About Debt Settlement
As mentioned previously, one of the pros of debt settlement is that if creditors agree to your settlement offer, they may allow you to pay back significantly less than what you owe. These days, many credit card companies may be open to negotiating with consumers who are truly struggling with their payments since many creditors often sell what they consider to be "bad debt" to third-party collection agencies for usually 10 cents on the dollar.
So if a creditor receives a reasonable settlement offer from you and understands that you are really in financial distress, that creditor may be willing to work out a settlement program with you.
Keep in mind that there are generally risks with the kind of debt relief where you "settle" your debts. Debt settlement companies typically advise their clients to stop making their credit card payments and start accumulating funds over a certain period of time that they can later use to make a reasonable settlement offer (or a lump sum amount).
While in the process of saving up funds, these consumers are generally defaulting on the terms of their credit card agreements. In this case, one of debt settlement's cons is that creditors may threaten consumers with legal action in an attempt to recoup their losses.
Another potential risk or con of settling: Even though debt settlement will not severely impact your credit as bankruptcy would, it will still adversely affect your credit, particularly if your credit was good or excellent prior to debt settlement.
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Facts About Debt Consolidation
As noted earlier, when weighing debt settlements pros and cons, it is wise to consider debt consolidation - which is yet another debt relief option. This method of debt relief is widely available to many consumers who are struggling with debts from credit cards and unsecured debts. Facilitated by credit counselors, debt consolidation typically begins with an assessment of your financial situation - taking into account your income, debts, and other assets/property.
When they have a clear picture of where you stand in terms of your debts, credit counselors will typically develop a game plan and contact your creditors to submit proposals - proposals usually include reduced interest rates and the waiving of late fees and penalties.
Creditors that accept the proposals, then become part of the debt management plan (DMP). Credit counseling agencies, in turn, distribute those funds to creditors that are in the plan. With a more structured and more affordable payment plan in place, you can, ideally, reduce your debts sooner than if you continued to pay only the minimum monthly payment on your credit card bills at higher interest rates.
How To Choose A Debt Settlement Company
Reducing the total amount owed is one of the pros of debt settlement that, for some, outweighs its cons. Ideally, however, you should be wary of any company that promises to save you an extreme amount of money when you are trying to settle your credit card debts.
While you can likely save a good portion in the long run with debt settlement, it is wise to have realistic expectations about how much you can potentially save and research a debt settlement company to make sure it is reliable. It is also wise to find out how long it will take for you to settle your debt.
The bottom line is, if you are in credit card debt, you are not alone. If you want to take the next step in paying down your credit card debts, start by comparing your debt relief options - for instance, the pros and cons of debt settlement and debt consolidation. Then, request a free debt relief analysis and savings estimate - at no obligation to you.