Understanding Credit Card Debt Settlement – 5 Real Facts You Must Know

For credit card users who have accumulated a large sum of outstanding balances, it is time for you to take quick action to overcome your debt issues before the situation becomes deteriorating. Taking up debt settlement plan can be one of the possible solutions. However, is it really possible to eliminate your debt within a short period through debt negotiation as what debt settlement companies keep promoting?

The answer is NO. No doubt you can get rid of your outstanding balances through settlement but it takes time and there are some drawbacks you need to accept. If you plan to appoint a debt relief company to assist you, you are reminded not to be trapped by their empty promises and guarantees. Let me tell you 5 false statements which are always given by the service providers in the market.

· Statement No. 1: Everyone in debt only needs to pay 30% of the total debt to settle his or her account

Reducing the debt up to 70% is only possible if the creditors don’t see any possibility to collect the debt from certain debtors. In general, most of the creditors do not agree to cut down the total debt so much. They usually assess the current financial position of their debtors first before making any decision. The normal range for reduction is between 25%-40%. If the settlement companies offer you 70% debt elimination, they are usually scams.

· Statement No. 2: Every service provider is the same in terms of types of services provided and its reliability

As a smart consumer, you should know that not all the service providers are the same. Only those genuine ones are registered members of the Better Business Bureau and The Association of Settlement Companies. Hence, it is more secured if you check the background of the companies thoroughly before making your selection. Besides, the debt relief plans offered in the market also vary in terms of service fees, percentage of reduction, success rate, etc.

· Statement No. 3: Debt settlement will not hurt the debtors’ credit score at all

As most of us are aware, settling debt will definitely hurt the debtors’ credit scores. If the service providers assure you that your credit rating will be well maintained, you had better to leave them. They should inform you the truth that your credit will be affected but can be rebuilt with proper budget plan.

· Statement No. 4: All the settlement proposals are well accepted by every creditor or lender

Always keep in mind that not all creditors are willing to accept settlement proposals from the debtors. They have no legal obligation to do so. In some cases, no matter how much effort you put in, the creditors will still say NO to you.

· Statement No. 5: All the settlement plans are free

In common, most of the debt relief plans are not free if they are provided by profit based organizations. Some settlement companies require the clients to pay upfront fee and some will only charge the clients according to certain percentage of debt forgiven.

After going through the above mentioned points, I strongly believe that you are able to identify those misleading statements given by the service providers.


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