Doesn’t it sound great? You can get a creditor to “forgive” part of what you owe in exchange for a one-time payment in full? Oh, happy day! But really, is credit card debt forgiveness as simple as that?
It may be, or maybe not.
Read on to gain an understanding of credit card forgiveness.
What Is Credit Card Forgiveness?
It’s when your credit card issuer agrees to set aside all or a portion of your obligation. Do note that in nearly all cases the emphasis is on “a portion.” It’s pretty much unheard of for a company to let you go on your merry way without demanding one thin dime.
How Does The Process Work?
You can handle the process yourself, although it may be better to get a professional you have authorized to represent you to contact the card company or collection agency that is handling the account.
The goal is to negotiate a settlement offer that allows you to fork over part of what you owe in exchange for that one-time payment in full. Once the card issuer gets the cash, they “forgive” or erase any outstanding balance.
You will take a hit to your credit, however.
Is It A Good Idea?
Understanding credit card forgiveness means you shouldn’t even be mulling the strategy unless you have concluded that your debt has taken on a life of its own, and you cannot possibly catch up by yourself. Experts say you should be at least three months behind in your payments before attempting to settle.
If you’re going to take this path, you may want to wait until a creditor decides to charge off the debt. At this point your unpaid debt becomes a loss for the company, which will likely sell it to a collection firm for a fraction of what you owe anyway. In that instance, it may behoove the creditor to accept a settlement and write off some of your obligation.
Therefore, the absolute best time to use the settlement tack is when a creditor sells to a collector, which may be relatively easier to deal with since it bought your debt for just a percentage of what you owed. This means it can profit through just a partial payment.
Consequences
Although debt forgiveness may work well for you in the long run, you will sustain credit damage that will hang out on your credit report for seven whole years after the date of discharge. That’s simply the truth about credit card debt relief. Your now-lowered credit score will likely present problems for you if you seek new loans or credit. Even if you do get approval, you will pay higher interest rates.
This consequence is merely temporary, however, since your credit can be repaired once you have regained financial stability and have your spending under control. And, you’ll be freed of the stresses that come with owing more than you can afford to pay.
Best Candidates
Credit card debt relief can be a lifesaver for those whose credit card debts are out of control, and who have no hope of corralling their obligations without some assistance. In fact, you wonder if you will ever be solvent again. But here’s the real deal: collections and missed payments have already scarred your credit. You simply don’t have far to fall here.
If you desperately need to break from overwhelming and ever-mounting debt, credit card forgiveness may be just the ticket you need to finally get yourself together.
Now that you have a good understanding of credit card forgiveness, take time to assess your situation and determine whether such a financial strategy makes sense for you. If you conclude that it does, then it won’t be very long before you’re on a sunny new path to a debt-free life.
