When you’re drowning in credit card debt, messages to clear your debts with the snap of a finger can seem appealing. The truth is that you CAN settle you credit card debt and you CAN settle it for less than what you really owe, but the process is a lot more complex than snapping a finger. Before reaching out to debt settlement companies, you should sift the truth from the myths you’ve heard. Here are five you can begin with:
1. Everyone can get their debt slashed in half
Honest debt settlement organizations will not promise to slash you debt in half without having examined and qualified your debt profile. Debt settlement programs are intended for people that want to pay off their debts but are in a difficult financial situation, e.g., termination of employment, demotion, medical bills, divorce proceedings or just exponentially growing debt. In other words, the lenders must prove that you’re facing true financial difficulty.
2. You can’t settle credit card debts on your own
While debt settlement companies have the experience it takes to help you through negotiations with lenders and other aspects of repairing your debt profile, this doesn’t mean that you can’t settle your own debts. In truth, no one can work as hard as you to get you debt-free. An experienced negotiator usually knows how much most credit card companies are willing to budge on their credit, and they bring additional leverage because they influence many clients. So it’s definitely a plus to have them around. You can read debt settlement reviews to find reputable companies to help you.
3. I must pay debt settlement companies upfront and give them full control of my money
This used to be the practice, but it has long ceased to be the norm. In fact, debt settlement companies are prohibited from taking advance fees before reducing or settling clients’ debts. In addition, money going towards debt settlement is usually placed in an insured financial institution and this account is owned and controlled by the consumer. The debt settlement company has a partnership with the financial institution to retrieve money for debt settlement.
4. Debt settlement doesn’t affect my credit score
Debt settlement can do nearly as much damage to your credit score as filing for bankruptcy. You won’t affect your credit score by making enquiries and negotiating with lenders, but succeeding in getting a settlement deal will have a negative effect. In addition, some debt settlement companies advise you to skip some payments, and this affects your credit report negatively. Your credit score is affected when the lender reports your settlement or defaults, and often they will. It is possible, however, for you to negotiate with them so that they don’t report the terms of your settlement.
5. Debt settlement isn’t expensive
This is true to a certain point. This is because most debt settlement companies charge a percentage of the amount of debt they negotiate down or a percentage of the total debt you owe. The advantage is that such fees only fall due after the company has made the settlement. In addition, consider that the amount of debt you’re forgiven may be taxable by the government.