Should You Consider Credit Card Debt Settlement?

What are the differences between credit card debt settlement and a debt elimination plan, and which one is right for you? These are questions to ask yourself if you are missing payments and getting daily collection calls. A debt consolidation loan is also an option, but chances are if you’re struggling to make ends meet you won’t qualify.

A Debt Elimination Plan

It is recommended to use a reputable debt management company such as CESI (Consumer Education Services Inc) to administer a debt elimination plan for you. They have a relationship with creditors who will be willing to lower interest rates and payments since they know they are likely to be paid every month and on time. The management company will take a single amount from your bank account every month and distribute it to your creditors until all balances are cleared. By bringing in a third party like this, you’re more likely to stick with the plan.

Because your credit accounts will be closed, your FICO score will go down some, but will improve as balances are paid off.

A Credit Card Debt Settlement Plan

A settlement plan reduces unsecured credit card balances by up to 40% or more and once cleared, considered payment in full. A Debt management company such as CESI can help you with this as well to settle the terms of repayment. This process can take quite a while and in the meantime, you’ll continue to be harangued by creditors until it is completed.

The credit card debt settlement option will trash your credit rating, but that can be repaired once all the balances are paid off, especially if done in a timely manner.

It is possible that even after many months of negotiating, creditors will decide not accept a settlement offer. Claiming bankruptcy then becomes the only practical choice.