Debt Settlement Benefits

A credit card debt settlement has benefits for your and the lender. The biggest benefit for you is that you get to pay off your debt at a fraction of what was originally owed. Depending on how old your debt is and how bad your lender wants to get the bad debt off of the books, you could be looking at a debt reduction of 50 percent or more. The benefit to your lender is that they get an old debt squared away without having to pay costly legal fees to sue you in court. They also no longer have to pay a collection agency or lawyer to send you notices and make collection calls. This saves the company some money, on top of the settlement they receive from you.

Debt Settlement Disadvantages

There are disadvantages for you and the lender as well with debt settlement. The biggest disadvantage for you is that you will have to pay off the

settled amount immediately and in one lump sum. This means that if you don’t have the money on hand, you can’t make the settlement. Another disadvantage is that you may breathe new collection life into an old account, if you and the lender fail to agree on a settlement amount. This means that a lender that hasn’t bothered you in months or years may restart collection efforts on your account. The only drawback for the lender is that they will receive less than the amount owed. You lender will take this into consideration when deciding to settle and how much to settle for. The amount you owe, the settlement amount you are offering and how much they have spent in lawyer fees to collect from you will all play a part in this decision.

Comparing Debt Solutions

There are four solutions for dealing this credit card debt reduction: pay the debt off in full, pay a settlement amount, file for bankruptcy or ignore the debt altogether. Paying a settlement is going to be cheaper than paying the debt in full, but will leave a negative mark on your credit report. A settlement is going to cost you more money than a bankruptcy, but it also won’t have the same harsh credit implications. While ignoring your debt may seem easy, paying a settlement will stop collection efforts, including lawsuits.

Depending on your situation and how much debt you owe, a credit card debt settlement may be the best option for you. If you owe a large amount and your state has a long statute of limitations on credit card debt, then you may be better off paying a settlement than waiting seven years to see if the lender sues you. However, you need to have your ducks in a row before offering a settlement. This includes ensuring you have the funds to pay off an accepted settlement.