Credit Card debts are so very easy to accumulate, yet can seem impossible to get rid of. The first step towards dealing with this situation is to acknowledge it and face up to the fact that your debt problem will only get worse unless you tackle it. The best way to put credit card debt behind you is to reach a settlement agreement with the card company yourself. You certainly should not consider taking out loans, or bankruptcy or anything else until you have tried to negotiate a settlement.
You do not need to use a company to do this for you. If you do, you will be paying them generously for their trouble, whether they make this clear to you or not. You could generally expect a settlement company to take about 15% of what you owe as their fee. When you already owe more money than you have got, that is potentially a lot of money to spend on something you could do for yourself at no cost.
With a little advice, you can approach your creditors yourself and negotiate a settlement that will allow you to pay back a reduced amount in settlement of the full debt. The credit card company naturally want their money back, but if they know you are not able to pay it all, they will settle for the most they can get. They will not agree to being ripped off, so you will need to prove to them exactly how much money you have and what you are in a position to pay.
To do this you need to prepare a personal financial statement, which will show clearly, your income, expenditure and what you have available each month. Your offer to them must be based on a fair proportion of your disposable income, considering any other debts and commitments you have. If you can prove that what you are offering is reasonable, you are in a much stronger position.
The process of negotiating with creditors is a well tested method and it does work if you follow it. Free guidance is available online for how to write letters, what you should say, etc. The process includes an initial letter to the credit card company to explain your position and that you wish to make arrangements to settle the debt. Once you have all the information you need and have prepared your financial statement, you can work out a fair offer and write to them again with this. It is important in any settlement process to put everything in writing and keep copies of all letters you send and receive.
You should start by asking them to waive any penalty charges, late payment fees and extra interest charges. For an overdue debt this alone can amount to about 30-40% of the debt. If you are in a position to offer a lump sum payment you may be able to agree a better deal than if you need to pay it off over a period of time.
If your credit card debt is fairly modest and you are not yet falling behind with payments, you may wish to consider just using balance transfers to improve your situation. By transferring to a new card with a special 0% offer on balance transfers, you can immediately save on interest charges and buy yourself time in which to pay off as much of the debt as you can. One of the key things with credit card debt is never to settle for just the minimum payment amount, or your debt will just mount up and up. Aim to pay the most you possibly can each month. The best way to do this is to set up a direct debt for the most you can afford, which will help ensure you do not miss any payments.
Read a detailed guide to negotiating debt settlement.
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With a debt management plan, the whole aim is to repay everything you owe, by renegotiating the terms and costs involved. For this to be viable you have to have enough spare income to afford the monthly payments on the plan. Where debt settlement differs from this is that it is all about writing off a large part of the principle debt and repaying the balance in one go. Debt settlement is therefore a more radical approach that is used by people whose situation is very serious. It is most suitable for people facing the prospect of bankruptcy or legal action. Debt settlement and debt management are very different services and are usually undertaken by different types of specialist company, though some of the large organizations do offer both.
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