The Good & Bad About Credit Card Debt Relief

When you're up to your head in credit card debt, you may wish there was an easier way fix the problem. Maybe you saw an infomercial for a company that says it can chop your debt obligations in half, or some other great amount. As with most endeavors, there are potential benefits and drawbacks in contacting a debt relief agency to help your situation.

Good: Relief

The greatest benefit by contacting a deft relief company is the financial savings you can receive. This will allow you to pay your credit card debts off sooner. Once you are free from your debts, you can use the opportunity to rebuild your credit score, which will have suffered through your late payments and mounting debt.

Good: Avoid Bankruptcy

If you are considering filing for bankruptcy, you should at least consider settling your credit card debt. Bankruptcy stays on your credit report for 10 years, making it a bigger and longer-lasting bruise. Going down the path of settlement and getting some relief from your debt is a preferable option for many people since they can avoid the stigma of having gone through bankruptcy.

Bad: Fees

What people cite as being the top complaint for debt settlement agencies is the amount of fees associated with hiring someone to negotiate with your creditors. Agencies are known for charging various fees for their services. While each company may be different, companies generally charge an up-front fee and monthly fees. You may also be charged a percentage of your debt savings, meaning if you saved $5,000, a percentage of that amount would be owed to the agency.

Bad: No Guarantees

There is no guarantee that your creditors will settle your debt with you. First of all, you must stop making payments to the credit card company for at least three months in order to give the appearance that you are unable to meet your obligations. This will hurt your credit score. If the creditor is fearful that it won't recoup the money, it may be willing to negotiate a settlement. Again, it may choose that route, but it has no obligation to do so.