Researching and looking for credit card debt reduction services can be incredibly confusing, especially if you are doing your research online. All of the conflicting information, confusing terminology, and thousands of companies claiming they can help you with debt reduction, it’s enough to make many people want to give up before they ever get the help they need.
For those of you lucky enough to find this site, I am going to walk you through the four main types of services that claim to help you get out of debt. I will give you a general explanation of each service, and give you an idea of which services to avoid and which might work for you.
Keep in mind this is just a general guide, and you should always get advice tailored to your specific situation. You may also want to read this related article on the various debt reduction programs.
Debt Negotiation and SettlementThe first service we will talk about is the one that, for now, is advertised the most. Credit card debt negotiation, or debt settlement, is generally the worst of all of these options. Unfortunately, due to the heavy advertising, it is also very popular.
In this case, the claims you see on commercials and ads are usually too good to be true. Most of these companies promise to reduce your debt by 50 or 60 percent and maintain your credit rating.
In reality, these companies will almost always do serious damage to your credit score and rarely deliver on the promise to settle all of your debts. Be sure to read up on the costs and pitfalls of these debt relief scams as well as the pros and cons of this method.
In fact, most debt settlement companies will have either a poor rating with the BBB or a very short history.
Credit Card ConsolidationAnother one of the very popular debt reduction strategies is some form of consolidation. Consolidating your credit card debt typically requires a good credit score and the ability to obtain credit.
While some settlement, bankruptcy, or even credit counseling companies claim to consolidate your debt, they don’t actually do so. In order to combine your actual debts into one single new balance you need some type of loan (or credit card). You can read more about your debt consolidation options in this article.
Debt Management PlansDebt management plans, which are sometimes referred to as credit counseling, is an option that is generally provided by non profit agencies. However, their are also a few for profit companies that provide this service as well.
With this option, the credit counseling agency works with your creditors and gets them to agree to a lower interest rate and, usually, a lower payment. You make your payment to the credit counseling agency, and they sound it out each of your creditors every month.
This can be a good option for people who need a little help, especially if they don’t have the ability to consolidate the debt to a loan with better terms and they cannot pay the balances down quickly on their own. You should speak to an accredited credit counselor and have a full counseling session to get information on if this is a good option for you. If it isn’t, a good credit counselor should still be able to help you come up with some type of debt reduction plans.
BankruptcyOne final option is bankruptcy, and it should be just that: a last resort. Try out your other options and make sure you have no other choice before filing for bankruptcy. There are some negative consequences you will want to avoid with this option; however, when you are out of options then bankruptcy could give you the relief and the fresh start you need with your finances.
What experiences do you have with credit card debt reduction services? Feel free to leave a comment or questions about your own experiences.
This entry was postedon Thursday, September 2nd, 2010 at 3:23 pmand is filed under Tags: credit card negotiation, debt management plans, debt negotiation, debt reduction plan, debt reduction services, debt settlement, reduce credit card debt.You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.« Carnival of Debt Reduction: End of Summer Edition9 Steps To Get Out Of Debt » Leave a ReplyName (required)
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