Credit card debt settlement is an option that you may be able to take for those who have long outstanding charge card debts where you stand not making the monthly obligations.
What’s Discounted Debt Settlement?
Sometimes, if a company notices you have not paid anything for some time and they figure it isn’t likely that they will get the full quantity of your debt plus interest, they will sent you a discounted debt consolidation offer.
They’ll write with an offer where one can pay perhaps 50% from the debt and they’ll write off the remainder. Usually they will want all of this in a single payment but if it is a large amount they may accept it in two or three instalments.
Often the letter can come from the business collection agencies agency. This can mean that your original lender has signed over the debt towards the debt collectors, or it may simply imply that the agency is employed by a percentage of what they recover.
Why Do They Offer Debt consolidation?
The finance companies offer this when they can observe that you’re having a lot trouble paying, they may need to take you to court to get the whole amount and maybe they wouldn’t even get it since you might file for bankruptcy.
So they possess a choice between incurring the cost of court proceedings and maybe still getting nothing of your stuff, or proclaiming to offer you this deal in which you pay 50% or whatever. They figure they’ll be best accepting 1 / 2 of your debts, than trying to get the entire amount through the courts.
What to do.
Whether you need to accept the deal depends upon many factors.
First, you should know that accepting this can affect your credit rating inside a negative way, because you won’t have repaid all of your debt. If you’re able to pay the full amount then its better for the personal credit record should you choose so. However, you probably will not have gotten to the point of receiving a settlement offer should you could pay entirely already. Accepting the settlement offers are usually much better than having court actions against you.
Second, you will need to consider the best way to make the payment that they want. Will it mean that other debts will go unpaid for a few months? What will be the consequences of that? Would you need to miss rent payments and maybe lose your house? Think carefully about the best way to raise the money.
Third, even though you decide to accept, it might be worth trying to negotiate a lesser settlement. This means calling them and saying that you cannot pay what they’ve requested however, you could pay 40% or whatever. This is often really worth trying because it can help you save some cash without extra penalties.
When you call, get the exact person’s name that you speak to. If they accept your offer, ask them to put it in writing and wait for a letter to come before you decide to pay. Then write instructions to send with your check proclaiming that this is the full and final settlement of the debt.
Remember that should you decide to not accept the sale, then after a while they might go ahead and take matter to court. A court may judge that you need to spend the money for whole amount plus the costs, so you might have much more to pay.
If you decide to accept, always read the terms and conditions on any offer. You need to be sure this really is full settlement and they’ll write off any additional debt, so that they have no right to return to you later on demanding more.
When things are complete, check out what’s been posted to your personal credit record. If there is any mistake you need to request it to be corrected immediately and you’ll have to send copies of of the correspondents. So keep all the paperwork whenever you accept any credit card debt settlement.
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