If you are up to your eyeballs with credit card debt, or any debt for that matter, one possible solution could be debt negotiation or debt settlement. This involves negotiating with your creditors to settle your debt for less than the face value. You could potentially reduce your debts significantly and/or reduce your monthly debt interest payment. However, this method is not for every one. And here is why.
Credit Scores take a plunge
When you negotiate with your creditors to accept a lower payment of the face value of your debt in return for a swift payment, they may report this to the credit bureaus. This will hit your credit scores significantly.
Hence, if you have very good credit scores, but your debt is piling up, debt negotiation or settlement with your creditors may not be the best thing to do. In this case, you should resort to budgeting, setting a systematic plan to pay of your debt and perhaps getting a 0% apr balance transfer credit cards to help with your debt reduction plan. You could also consider a home equity line of credit and consolidate your debt.
But if your credit score is really bad to begin with
But if your credit scores are really bad to begin with, then you may want to consider debt negotiation or settlement. The advantage of going this route is that you will considerably reduce your debt load, reduce the time to pay off your debts. If your credit score is poor to begin with, then getting a hit in your FICO scores will not matter as much.
DIY or Hire a Professional?
There are two ways to go about doing it. You can obviously do it yourself. Or you can hire professional firms to do it for you. The advantages of hiring a professional is that they will know which creditors will likely to accept a 30% of what you owe, which will accept 60% and which will not negotiate at all!. They also have experience doing this over and over again for many people.
When you are deep in debt and your credit score is really bad, you may want to consider debt negotiation or debt settlement as you can drastically reduce your debt and the time it takes to fully pay it off. If your credit score is good, then you should not consider this. Instead, develop a systematic debt reduction plan or consider taking a consolidation loan instead.