Debt Settlement Program

If you are contemplating on venturing into credit card debt settlement programs to manage and eventually eliminate your debt, you should take the following important factors into consideration before you finally make a decision.

Know the rules of the credit card company

This is most crucial when hiring a debt settlement company to do the negotiation on your part. Since you will be paying the company for representing you at the negotiation table, you should have an assurance that there is at least 50% probability that the credit card company will actually allow debt settlement. You would not want to enter into a new financial obligation without knowing the credit card company’s policy on debt settlement.

Also, if the company’s policy allows debt settlement, find out if it has a set minimum on how much they are willing to settle.

Compute if debt settlement is worth it

Take note that debt settlement will do great damage to your credit score which may take a long time to repair. Thus, you have to make sure that you are doing the right thing.

If the credit card company has a set minimum on how they are willing to settle, determine the maximum amount possible that the company is willing to write off. With this amount, determine how much in taxes will be charged against you as income tax (since the written off amount is considered taxable income) and add that to the service fee of the debt settlement company (if you are hiring one). The sum is the amount of possible expenses. Compare your possible expenses with the maximum allowed loan write-off and you will then arrive at the amount of your possible savings. Although this computation cannot be considered exact science, it will give you a picture of how much you may save from the settlement and whether or not it’s worth it.

DIY or Hire a settlement company?

If you do not want to burden yourself with additional financial obligation – settlement company fees – then you might want to try credit card debt settlement on your own. Communicate with your credit card company. Inform them of the problem and show proof why you are no longer capable of paying your debt in full. Research as much as you can on debt settlement and how to negotiate effectively for the settlement of your debt.

If you are not confident to do the settlement on your own and don’t mind paying a fee to the settlement company, then hiring them may be a good option for you. Before you hire one, shop around first. Compare prices, success rates, as well as feedback from both previous clients as well as the from the credit card companies.

The above factors will help you decide on the appropriateness of credit card debt settlement for your current debt condition. So, do your research and evaluate it well.

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