When you max out on your credit cards, you have an excellent solution: debt settlement. You can relieve yourself of the burden without having to pay a lot of greens.
Debt settlement companies work with you and negotiate with your creditors on your behalf. They can reduce or eliminate your debt by offering to make a lump-sum payment at once. You may deposit this amount in an escrow-type account until you collect enough savings. The creditor accepts this credit card debt settlement amount in place of what you owe.
The process seems simple enough, but choosing the right debt relief company is crucial. Also, there are so many myths surrounding the topic. So, here are the top 3.
Myth #1. You can easily cut your credit card balance in half.
Some sketchy companies may promise you that anyone can get their debt waived off. But that is just not the case. Competent companies can tell if your situation qualifies you for the program.
There are certain reasons allowed by the law, such as financial hardships, pink slips, and divorce. You may even face severe medical issues that don’t allow you to make the monthly payments. Or, you may bury yourself in a vicious cycle of borrowing habits. In such cases, you can be eligible for a credit card debt settlement.
Your creditor will not reduce your debt if they think you can pay off the debt. They should understand that you have a legitimate financial difficulty.
Myth #2. Your spouse’s debt merges with yours when you get married.
You may have joint savings accounts after you get married, and take out a loan or a credit card. Or, your spouse may add your name on a promissory note when taking a loan. Only then, your spouse’s bad credit may affect yours.
But from the time you get married, you will not be automatically responsible for their debt. Merging of debts incurred before the marriage does not happen. There is no legal obligation that you should settle your lawfully wedded partner’s liability. However, a divorce decree will not remove your ex from the joint account. You have to approach the creditor individually. Otherwise, their lousy credit practices show up on your credit report.
Myth #3. The debt settlement company will take a substantial amount of fee upfront.
Per the Federal Trade Commission rule, you don’t have to pay advance fees to debt settlement companies. They usually take a percentage of the amount from the debt that got eliminated. You can pay this fee after they reduce your credit card debt.
Your debt relief company also doesn’t control your money. The money that you save towards the lump-sum amount stays in a secure financial institution. You own the funds and any interest accrued on the money before the job is complete.
Now that you understand the common financial myths, it is time to choose the right company. Beware of spurious companies that offer you unbelievable guarantees.
Red Flags While Choosing a Credit Card Debt Settlement Company
- They may promise to make you 100% free of your unsecured debt.
- They guarantee that the debt settlement will prevent lawsuits.
- They say that they have a new, government-approved program.
- They ask to pay fees upfront or charge a penalty when you withdraw from their service.
- They insist that you stop interacting with your creditors.