Debt Settlement Companies
Are you one of many California residents who are struggling to make payments on high-interest credit card debts and other unsecured debts? If so, you can breathe a little easier because there is help available - in the form of debt relief via debt settlement, debt consolidation through a credit counseling agency, or even bankruptcy.
With debt settlement, you are hoping to settle or negotiate with creditors for a reduced amount of your credit card debts. On the other hand, debt consolidation is a process where you typically combine your high-interest credit card debts and other unsecured debts into one, more affordable, and more structured payment made to a credit counseling agency. These days, both methods have become popular alternatives to bankruptcy - which has a more damaging and longer lasting impact to one's personal credit.
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How Credit Card Debt Settlement Works
As mentioned earlier, debt settlement is a proven and legal form of debt relief that has helped many consumers reduce their credit card debts. When you enroll in a debt settlement program, you are hoping to settle or negotiate with your creditors for significantly less than what you owe.
However, if you are considering debt settlement, it's important to understand the potential risks. As the term "debt settlement" suggests, credit card companies are certainly not legally required to "settle" or accept your settlement proposal. In many cases, you will be advised to stop making payments on your credit cards to save up funds, over a period of time that you can later use to make a reasonable settlement offer.
In these cases, creditors may threaten to sue if you default on the terms of your credit card agreements. In addition, many consumers who default on the terms of their credit card agreements typically see a decline in their credit scores. But in spite of the risk involving one's credit, debt settlement remains a popular alternative to bankruptcy - which, as mentioned previously, can have a more serious and longer-lasting effect on your personal credit.
Debt Consolidation or Debt Management
As noted earlier, if you are a California resident struggling with credit card debt, there are companies that offer debt settlement. However, there is also relief through another process known as debt consolidation or what is sometimes referred to as a debt management plan (DMP). Debt consolidation typically involves "consolidating," or combining, your multiple, high-interest credit card debts into a single, more affordable monthly payment made to a credit counseling agency.
When you enroll in a debt management plan, you will work with credit counselors who will review your finances and debt situation. Once they have all the financial information that they need, credit counselors will typically submit proposals (on your behalf) to creditors requesting a reduction of interest rates, or waiving or elimination of any late fees and other penalties.
Creditors that agree to the proposals are entered into the debt management plan. It's important to understand that while it is the credit counseling agency's responsibility to disburse funds to creditors, it is your responsibility to make sure that you have money available in the account set up for your monthly payment. Many reputable credit counseling agencies can even provide you with a due date (when they draw money from your account) that takes into consideration, for instance, when you get paid or have the funds available in the account.
The bottom line is, if you are struggling with debts, there is help available. The smart thing to accomplish is your due diligence. In other words, understand all your debt relief options regardless of whether you choose debt consolidation through a credit counseling agency, or choose a program offered by debt settlement companies.
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