Credit Card: Debt Settlements
Credit card debt is increasing because of the rising interest rates. High rate of interest is leading to credit card defaults. People are not able to pay even the monthly minimum due amount. Many leading financial institutions have set up payment programs to help the credit card holders who are in trouble. While a few firms have increased the rate of interest to boost their profits during the recession. Remember, credit card is an unsecured loan because you do not have to make any down payments when opening an account with any credit card company. Therefore, if an account holder defaults on the monthly amount, the credit card company does not have any underlying assets to recover from you and it is in a loss. Studies reveal that many people are not aware of the risks involved with credit card debt. They are unaware of the fact that their credit card company can file a lawsuit against them. If the credit card company wins the case, there are chances of wage garnishment or property seizure. When you have defaulted on your credit card payment your credit report will be blemished.
Credit Card Debt Settlements
Many of the consumers are unaware of debt management tools such as debt counseling and debt consolidation. Instead of approaching a debt counselor for help, most of the people with credit card debt file for bankruptcy in fear of wage garnishment or seizure of their personal possessions such as a vehicle or the house. However, Bankruptcy should be the last and final resort. There are many ways to settle your credit card debt. Here, we look at a few credit-card debt settlement strategies.
Once you are aware of your credit card debt, fix an appointment with a reputed debt counselor. He will be able to counsel you and also formulate a plan to help you get out of the credit card debt. He can advise you to deal with your collection agent or the agency using debt validation.
Debt validation method is the first step to settle your credit card debt. In debt validation method, you should find out the credibility of your debt collector/collecting agent and the authenticity of the collecting agency. You can ask the agent to produce the copy of the original legal contract of your creditor (credit card company) to validate the identity of the debt collector and the collecting agency. This will help you to find out whether the debt-collector is following the principles that are included in the 'Fair Debt Collection Practices Act'. This is a legal tool that you should use when you are being harassed by a debt-collecting agency.
Debt negotiation is another tool to settle your credit card debt. You should get in touch with your credit card company to settle your debt. In fact, you can negotiate with them to bring down the rate of interest on your principal amount. There are many debt settlement firms that specialize in debt negotiation. These firms will approach your creditors and negotiate with them not only to bring down the rate of interest but also to write off a certain sum of money in return for a full settlement of your credit card debt. Debt negotiation will not harm your credit scores because the creditor would report to the three major credit bureaus that you have cleared your debt.
Credit card debt consolidation is one of the ways to settle your credit card debt. Approach a reputed credit counselor for credit counseling. He will help you with credit card debt consolidation. He would be able to guide you in getting a debt consolidation loan at a favorable rate of interest. When you are settling your credit card debts avoid using the credit card to make any further purchases.
Check the Statute of Limitations before settling your credit card debt. The Statute of Limitations (SoL) for debts is a statute/law that sets the time limit for a creditor to file a lawsuit against a debtor. The credit card company can file a lawsuit against a debtor even if the Statute of Limitations has expired on the debt. However, the debtor (defendant) can dismiss the lawsuit on the basis of the expiry of SoL. The creditor will report you to the credit bureaus and this will create a black mark on your credit history.
To summarize, given above are some of the techniques to settle your credit card debt. According to the rules charted out by the Federal Reserve, a credit card holder is given a grace period of 21 days before being slapped with a late fee. To reduce the credit card debts, the banks are working with the government to increase the rate of interest on the future purchases and not on the existing balances. It is wise to keep yourself updated with the latest changes of the financial world. It would help you to tackle your credit card debt efficiently.
