With the current status of our country’s economy, you have to be wise enough on how to spend your money wisely to sustain your daily needs. One of the most common debts that have the potential of creating a financial burden in an individual’s life is credit card debt.
Let’s just say – you want to let go of your credit cards as you can’t financially cover the monthly payments anymore with your monthly budget. You have other needs to attend to such as your home mortgage, weekly groceries or school expenses that require payment, and you think your credit card would just add up to the burden.
So, how are you going to fix this? Should you settle your credit card debt? But how? Before you take any drastic measures to settle your credit card debt, here are facts that you need to know first:
Fact No. 1: Filing for Bankruptcy Is Never a Good Option
If you think when it comes to settling the debts that you have incurred from say 5 credit cards that bankruptcy would be the best option, then you’re entering a zone that would bring you so much trouble. Granted the fact that you’re seven months behind on your credit card payment, you would automatically be registered as a delinquent payer and this would hurt your credit score rating.
However, if you plan to file bankruptcy because you know it would help you eliminate your credit card debts, it would significantly damage your credit score. It would even stay on your credit report for 7-10 years. What’s worse is that when you apply for another credit card after two years of filing for bankruptcy, your chances of getting approval would be slim. If you were approved, you would be borrowing credit with much higher interest rates and penalty fees.
Fact No. 2: Debt Settlement Is A Better Option
If filing for bankruptcy is not the right direction to head to, to get rid of your credit cards, then a debt settlement plan can be the next best option. Although going for debt settlement would still affect your credit score rating and would even be considered the lesser evil as a means to cut off your credit cards.
Fact No. 3: Paying a Lesser Amount with Debt Settlement
The good thing about debt settlement is that you can negotiate with the credit card company that you’re willing to settle your credit card debt at a lesser amount. You can try reading here to get tips before contacting each company. In doing so, you have to get the approval of the creditor. If you get the approval, then you won’t be paying the whole amount you borrowed from them for using the credit card. Instead, you may settle for an amount that both of you have agreed upon. Let’s say, instead of paying $10,000, you’ll just pay your creditor with $5000. Creditors usually settle with this agreement since it would be costlier on their side if they would resolve this in court.
Fact No. 4: Debt Settlement Companies
If you’re not that well-versed when it comes to settling your debt with your creditor, you can seek professional help. There are so many debt settlement companies out there that can help you in negotiating with your creditor about a certain amount that you can pay to settle your debt. However, you have to make sure that you seek help from a legitimate one as there are a lot of scammers out there that are ready to prey on you. Avoid those companies that demand upfront fees before the settlement has been made, these are generally just scam companies trying to get your money without having to provide you with a service.
Fact No. 5: Settling in Smaller Payments
You might be thinking of a debt settlement plan or, worse, filing for a Chapter 7 or 13 bankruptcy. Well, you still have other options to resolve your situation. That option is called forbearance. This is going to be a delicate discussion with your creditor. With this option, you can ask your creditor to make smaller payments until you have fully paid your debt. This way you can manage your funds better and have a higher chance of really paying back your debts over time. Ask your creditors about this option to see what they say.
With these facts in mind, you should have an idea of what would be the best option that you can choose to put an end to the problem that your credit cards have caused you. Be smart with your decision as this would be your way to acquiring a debt-free life. Whether you have a large debt hanging around your neck, or a small one, it’s important to always look into different ways you can become debt free. So are you ready to settle your credit card debt?