Credit Card Debt Negotiation

  Credit Card Debt Negotiation  - The secret of successful debt settlement  - May 7, 2007  

Debt Settlement, also called debt negotiation is an arrangement between a debtor and a creditor to repay a debt generally for a for a lowered payoff amount. When a debtor is not able to pay the debt any more for any reasons, debt settlement is the only option that remains.

Generally, only unsecured debts, like those accrued with credit cards , can be negotiated for settlement. This is because of the fact that there is no security attached with unsecured debts. Hence, the lender can't repossess anything. On the other hand secured debts, like home loans, mortgages, car loans etc. have a collateral attached to them and can be repossessed by the lender if a default on debt occurs. So, there is no debt settlement or negotiation with secured debts.

Many third party companies offer debt settlement and negotiation services. These companies contact both the lender and the borrower and negotiate on the behalf of borrower to get the repayment amount and terms reduced. These services don't come cheap. Some good debt settlement companies can get the debt reduced by 50% or more, but charge around 10-20% of the debt amount as their fees.

To support the debt settlement industry and develop standards and best practices, practitioners established the United States Organization for Bankruptcy Alternatives (USOBA) in 2004 and in 2005, industry leaders established The Association of Settlement Companies. (TASC) TASC's goals are to promote good practice in the debt settlement industry, protect the interests of consumer debtors, and lobby on behalf of debt settlement companies on the federal and state level.

It has to be remembered that debt negotiation is getting the debt burden reduced and becoming debt free. Debt settlement shows poorly on a persons credit report and if not tackled properly can lead to bankruptcy.

  Credit Card Debt Negotiation  - Debt Settlement: Benefits and drawbacks  - Apr 8, 2007  

The most popular solutions to the problem of heavy debt burden is to get a debt settlement or file for bankruptcy. Among these two debt settlement is preferred as it has a relatively less impact on credit report. In this article we assess the benefits and drawbacks of debt settlement.

Debt settlement is a process in which an organization will go to your lenders and negotiate with them regarding your debt. The purpose of the whole exercise is to reduce your debt burden. If a settlement company is good it can get your debt reduced by as much as 50%. This is  what a creditor needs and this is the most visible benefit of debt settlement. The amount of the debt is reduced, the repayment plan is made easy and often the monthly installments are spread over a long period. This makes life a lot more easier for the borrower.

However, debt settlement is not without its drawbacks. There are two things to worry about. First, is the cost of debt settlement. Debt settlement companies will charge huge amounts for their services. The usual range is between 10-15% of the debt amount. Paying this much amount upfront can turn your financial situation from bad to worse.

The second problem caused by debt settlement is the damage done to your credit report. The very fact that you are going for a debt settlement will show negatively on your report. But, it is still better than filing for bankruptcy, which will make a bigger dent in your financial credibility.

The whole process of debt settlement becomes meaningless if you don't change your financial habits for good. With all the drawbacks, debt settlement still provides a chance to get your finances back on track and should be used for it.

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