Ara Betty is a freelance financial writer and speaker about personal financing. She helps people realize their goals on becoming debt free with the use of debt consolidation. She hopes to expand her knowledge more about loans and debt to be able to write a book.
There are various myths that surround credit card debt settlement. A debtor may not tell apart the truth from these myths that are often told. The following are some of the myths associated with getting out of debt and the truth about credit card debt settlement:
Myth 1: You need to pay someone so as to get yourself out of debt.
Fact: This is not often necessary in some instances. There is an increase in the number of debt settlement companies that are scams. Do yourself a favor and avoid losing more money to such scams. The situation is only well understood by you and you can negotiate the debt settlement terms for yourself. A debtor will put in more effort to get out of debt than one who is hired to do this. However, it is agreed that in some instances, it will be advantageous to have a negotiator or a payday loan debt settlement company.
Myth 2: An individual’s credit score will not be hurt by credit card debt settlement
Fact: Settlement of debt, just like bankruptcy can affect your credit score. Although debt settlements and defaults may not influence your credit score if they are not reported, this is just a temporary situation. The truth of the matter is that debt settlements are normally reported, eventually.
Myth 3: Any individual with a good reason can get their credit card balance slashed into half
Fact: There are underwriting criteria that are looked into so as to enable a debtor to have his or her credit card balance halved. Debt settlement companies and creditors will conduct a thorough screening to prove that one is experiencing the hardship that meets the underwriting criteria. A debtor experiencing hardships such as a divorce, temporary job loss and medical problems may get debt settlement.
Myth 4: The debt will stay forever if I do not settle it
Fact: There are statutes of limitation in each state that limit the duration in which debt collectors may file lawsuits over credit card debts that are yet to be paid. Therefore, if a debtor has an unpaid amount over a number of years on a charge account, such a debt is not legally enforceable. This is because at such a point, the payment to be made will be considered voluntary and not in a debtor’s interest as negates the argument of the credit card debt collection limitation.
Myth 5: Filing for bankruptcy or getting debt settlement are my only options when I am unable to pay the credit card debt.
Fact: These are options that are extreme, which may lower your credit score and you have other options such as getting forbearance. This is a situation whereby you may still be charged an interest on your loan, but you will be allowed to make payments in smaller amounts or to make no payment at all. Instances such as a job loss are considered for forbearance.
These are just some of the myths about credit card debt explained. However, if you find it challenging to settle your debt, do consider managing your finances well and be well informed on the options available to you.