You might have come upon the concept of credit card settlement if you have been looking for a way to deal with your credit card debt. After all, it isn’t uncommon to see a credit card relief company make extravagant promises about how their customers will be able to get away with paying pennies on the dollar. This can be very attractive if you are deep in credit card debt. However, you need to understand how credit card settlement works before proceeding any further, so here’s how credit card relief operates.
What Is Credit Card Settlement?
Credit card settlement means negotiating with the credit card issuer so that you can discharge your outstanding debt in exchange for a one-time payment in full of a smaller amount than you owe. It is a real thing that can happen.
While there is no guarantee that your creditors will agree to the offers, they understand full well that if they don’t settle, you’ll likely file bankruptcy, which will probably net them zero. So, they usually do.
There are a couple of ways that most people seek out a credit card settlement. One, they try to negotiate on their own. Two, they seek out companies that specialize in said task. Both ways are legitimate options. However, if you choose the latter, you need to have a clear idea of what you can expect.
How It Works
According to the credit card relief experts from FreedomDebtRelief.com, you’ll need to have enough cash on hand to fulfill settlement agreements, so it is common for these companies to require their customers to make payments into a special savings account for 36 months or so. After that, your negotiators will use those funds as leverage to get your creditors to settle.
It’s important to note, no funds will be disbursed from that account without your approval. Moreover, you’ll have direct control over the approval of any deal offered. Once a debt has been settled on your behalf, the relief company will issue you a bill for its services. It’s illegal for them to do so before a debt settled.
Your Credit Score Will Be Affected
The way the process of debt relief works, instead of paying your creditors directly, you’ll put money into an account that you control. As we’ve explained, those funds will ultimately be used for each of your settlements. Note that due to the debt settlement process, your credit will take a hit – temporarily. Your scores will rebound nicely after your settlements are completed and you begin to rebuild your credit. And after all, your credit isn’t the greatest right now anyway. Right?
Watch Out for Scammers
Unfortunately, there are a lot of scammers out there that will engage in various sorts of bad behavior to separate you from your cash. For example, they might make guarantees that they have no way and no intention of keeping. Similarly, they might seek to collect their fees before they have resolved any of your debts, which is very much against the law. A good company will work hard to provide potential customers with a good idea of what they should and shouldn’t expect out of the process. As a result, if a company tries to obfuscate or over-promise, you need to be very careful or even walk away.
By this point, you should have a clearer idea of what credit card settlement is and how it works. While it’s not for everyone, it is a tried-and-true method that has helped scores of consumers like you. You just need to apply and little patience and perseverance, and you’ll be on your way.