Settling credit card debt : Ways to fruitfully complete the process

credit card debt

As far as outstanding credit card balances are concerned, there are ample opportunities to bargain for a comfortable repayment term owing to your financial hardship. However, in order to slash the debt amount by more or less 50-70%, you need to put up a brave face and must have the requisite negotiation skills to successfully complete the debt settlement process.

 Debt settlement – What are the fundamental things to do?

Basically, settling debt will require you to go through a tough negotiation process where you’ll have to offer a huge, single payment towards a current outstanding loan balance in exchange of forgiveness on the remaining debt obligation. For instance, you have a credit card balance of $12,000 on a particular credit account and you approach the respective creditor with an offer to repay only $8,000 out of the total amount owed.

Once your offer is accepted by the creditor, you’ll be given a relief from paying off the remaining outstanding debt amount of $4,000.

Why do credit card companies accept settlement offers?

You must be wondering, why a creditor would purposely agree to lose a part of his income in return of granting you the relief from your obligation. There are primarily two main reasons behind such an act of philanthropy and that is either creditor himself is undergoing severe financial crisis or that he fears losing the entire loan money altogether should you file for bankruptcy in order to get rid of your debts and collection harassment.

So, in reality, these creditors are trying to defend their own bottom line by accepting whatever comes their way as reduced repayment. This is one of the crucial determinants why debt settlement has flourished all this while as one of the most preferable bankruptcy alternative.

Here again settling debts can prove to be a fruitful one given the fact that only unsecured loans are considered for such a debt relief process since they don’t originate against any collateral. As a result, creditors can’t liquidate any of your assets in the event of your payment default.

How do you carry out a debt settlement process on your own?

Once you’ve decided to take the debt settlement route to straighten up your finances, then the next stop would be to decide whether or not you’ll do it all by yourself or take professional assistance. In this case, it is good to always bear one thing in mind that credit card issuers prefer to work with their clients directly than through some debt negotiators.

Additionally, the debt settlement industry is riddled with high rates of scams and rip-offs. Due to this reason, a lot of debtors like you try to settle their financial obligations on their own. Regardless, of your debt settlement approach, the most important factor in making the process a successful one is to display severe level of financial hardship in front of the creditors.

If you are truly subjected to extreme cash crunch, then your creditors will be more willing to sympathize with you and work out some prudent ways to bail you out of your financial troubles. However, if he sees too many designer label purchases or frequent night-outs at five-star restaurants, then it is very likely that your settlement offer will get rejected and get thrown in the trash bin.

So, the best way to prepare for a debt settlement is to stop making any purchase for about 3-6 months prior to approaching your creditor for help. This is because credit card issuers will study your recent past payment history while deciding whether or not you are a suitable candidate for debt forgiveness.

Author Bio

The article was written by Ryan. He loves to write finance based articles.

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