Reduce Debt Faster

One question that I hear fairly often these days is whether or not credit card debt negotiation services can really help people get out of debt.  Most of the people who ask me this usually have no idea what terms like debt negotiation, settlement, or debt relief mean or how these programs and services work.  Chances are you have come across some ad or another promising to help you get out of debt, and you’re wondering if you can really negotiate or reduce your debt that you owe.

It actually is possible in some cases to negotiate the balance on the debt you owe.  This is actually the same as settling your debt, and if it is  something that you are considering you should carefully research the pros and cons.  There are many not so obvious debt settlement pros and cons that most people are not fully aware of.  

Usually, you need to be several months behind on your payments before your creditor will negotiate a settlement with you.  However, if you are not behind already, falling behind could cause a sizable drop in your credit score.  You can settle your debt on your own, or you can you use the services of a debt negotiation company.

Debt Negotiation Companies

Debt negotiation companies are the same thing as debt settlement companies.  As I said before, if you are considering this debt reduction program, be sure to do your homework and find out what these services are all about.  It may sound like a good deal to have debt negotiators work with you and reduce the amount of debt that you owe, but in reality it is not so simple.

Here are a few quick points to consider:

• You have to fall behind on your payments.  If you are not behind now, you will fall behind when you begin working with the settlement company.  Your “low monthly payment” will be held by them and your creditors will not be paid for several months.
• Your creditors can and will still try to collect from you.  If you have a large debt, it is certainly possible for you to be sued.  And make no mistake, YOU are the one who will be left to deal with it.
• Most debt negotiation services have a terrible record (if they have one at all) with the Better Business Bureau, or they are a new company that has not been in business long.
• You might have to pay taxes on the “forgiven debt.”  This means if you owe $10,000 and you settle the debt for $5,000, you could have to pay income tax on the $5,000!  Plus, you will probably pay a couple thousand dollars to the settlement company in fees.

If you are not behind on your payments, or if your dealing with credit card debt that has not yet been charged off or sent to collections, you’re probably better off looking in to other forms of credit card relief.  Debt settlement or negotiation is probably not the best solution for you in this case.

If you are already several months behind on your credit card payments, especially if they are already all charged off to collections, then you might still be considering settlement.  Just keep in mind the points I made above and weigh them in your decision.  However, if you still think it is beneficial to negotiate your debt, you are usually better off learning now to negotiate a settlement on your own rather than using a credit card debt negotiation service.