Is Credit Card Debt Negotiation for You?

Is Credit Card Debt Negotiation for You?

You may have heard or seen ads for credit card debt negotiation services offering to help people who are unable to pay their bills. In some circumstances, this is a viable option for consumers who want to get their finances back on track. Before you make a decision to look at a debt negotiation to deal with your situation, you will want to educate yourself about the process.

Credit card debt negotiation is not the same thing as getting a debt consolidation loan. When you take out a loan to pay off your debts, you fill out an application at a bank or another lender. You will need to put up collateral, such as the equity in your home, as security for the loan.

Credit card negotiation is a different process. In this situation, you, or a company working on your behalf, works with the credit card company to work out an amount the creditor will agree to take. The creditor agrees to take less than the original amount owed to settle the debt. In some situations, this amount is 50 percent of the debt. The advantage to the creditor is that they end up receiving more than they would get if the consumer went into bankruptcy.

The consumer who successfully negotiates a credit card settlement can avoid bankruptcy. There will be consequences for the person who chooses this method of dealing with their debt, though. The fact you negotiated a settlement instead of making your regular payments will appear on your credit report. It may lower your credit score, but the impact will be lower than if you declared bankruptcy.

Negotiating your own credit card debt settlement may be too overwhelming for many people. Being able to work out a settlement arrangement when you are financially (and emotionally) involved puts extra pressure on you at a time when you are already feeling stressed. A better approach is to consult with a representative from a professional credit card settlement company to approach your creditors on your behalf. That way, you keep yourself at arms' length away from the negotiations.

When you are considering which credit card debt negotiation company you would like to work with, take the time to learn something about the ones you are considering. You will want to find an organization that is a member of the United States Organization for Bankruptcy Alternatives, since membership indicates that the company is bound to abide by certain ethical standards in its dealings with clients.

If the debt negotiation company has a web site, spend some time going through the information posted there in detail. Pay attention to the company's "About Us" page to find out how long it has been in business. You will also want to be on the lookout for information about the kind of training that the client's representatives receive before they start working on files.

Once you have found a company that has been in business for a number of years that you are interested in working with, the next step is to schedule an appointment for a consultation. Before you arrive, make a list of questions that you have about how the process works and what your responsibilities are in this situation. You should also be prepared to provide detailed information about the amount you owe and to which creditors.

Each situation is different, and a credit card debt negotiation firm shouldn't promise you that they will be able to work out a settlement for you. They should be clear about the fact that they can approach the company to start a discussion but that there are no guarantees. However, these companies can offer a possible solution to people affected by the economic downturn so they can get back on their feet again in the easiest possible way.