Credit Card Solutions - When Does a Debt Settlement Process Make Financial Sense?

Credit Card Solutions - When Does a Debt Settlement Process Make Financial Sense

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Debt relief needs to be tailored to meet the requirements of the debtor. There are many solutions being offered for eliminating Credit card debt. What ever the solution being adopted, it needs to be seen if it makes financial sense. Let us take a look at the various solutions available and their financial implications.

Debt counseling is a way of managing the debt in a better fashion. You can get it reorganized at a new rate of interest that could be much lesser than earlier. However it could also mean that you will be paying back the debt in a longer time frame. Thus you are not only paying back the debt in more time but are also paying more money in the longer run.

Most users who are struggling to keep their head above the water would prefer to clear their debt rather than prolong it any longer. This requires them to use special methods to get rid of the debt in half the time. One such solution is debt settlement. In a settlement you negotiate the total amount of debt with the creditors. If your debt is more than $10.000 you are eligible for a debt settlement.

The creditors have to be fully convinced that your only option is bankruptcy. Offering you a settlement does not make financial sense in the short term to the creditors. They will have to waive a large part of your debt. However, if you consider the possibility of the creditor filing for bankruptcy, debt settlements make a good choice for the creditor as well. For the debtor in any case it is a good choice since the overall amount of debt is cut down to as less as 50%. The debtor has to arrange to make a one time payment to the creditors.

The only place where the debtor looses is his credit score. There will be a temporary damage to the credit score which will take 1 to 2 years to be undone.

Debt settlement is a viable alternative to filing bankruptcy. Most consumers are able to eliminate at least 60% of their unsecured debt while avoiding many of the negative consequences with filing bankruptcy. If you are over $10k in unsecured debt you will be eligible for debt settlement.

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