If you are trying to figure out how you can pay your credit card debt off more quickly, you are not alone. Many people today are carrying high balances on their credit card accounts, and these often are individuals who cannot afford to make more than the minimum monthly payments on their debts. Credit card debt can leave you feeling strapped for cash, which only seems to compound your financial woes as you don’t have money left for savings or sometimes even for the basics like clothing and food if your monthly payments are too high. There are several debt payoff options available to you, and these include credit card consolidation loans, debt settlement, and bankruptcy.
Who Should Consider Debt Settlement
The fact is that each of these debt payoff options are right for certain circumstances. For instance, you can qualify for a consolidation loan, you should consider that as a first choice as it will have no negative impacts on your credit rating. Bankruptcy should be considered as a last resort because it can have the most significant impact on your credit rating. Settlement and negotiation generally falls in between the two. It is best suited for those who cannot qualify for credit card consolidation loans but who don’t want to or don’t need to pursue bankruptcy as an option.
Why Your Credit Rating Will Be Affected
Through the process of settlement and negotiation, several steps take place. One step involves ceasing making minimum monthly payments on your accounts and putting those funds into an escrow account each month instead. The reason behind this is so that you give your creditors justification for negotiation. Another step involves negotiating a reduction in the outstanding balance owed and in the payment structure of the debt, too. In order to receive a good credit rating on your credit report, you have to make monthly payments according to the terms you originally agreed to. The process of negotiation may result in a favorable outcome for you in terms of a reduction in debt load and better payment terms, but the result is that you end up not paying on the account as agreed.
This process is not without its fees and charges. Each professional negotiation company will charge different fees. Some companies have given this industry a bad name by charging up-front fees, and in general you should try to avoid such a payment structure. The fact is that your credit card companies do not have to agree to reducing your outstanding balance, and so the outcome of this process is not guaranteed. Paying for a service that cannot be guaranteed is risky, and so you should only work with a company that will charge you a fee based on results.
The fact is that there are some downsides associated with negotiating your debts, but there are some benefits, too. For those individuals whose credit rating is already damaged due to late payments, slow payments, or collection accounts, or who cannot qualify for a consolidation loan, this is a feasible option to consider for paying off your debts more quickly.
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