If you have been following the news, you are probably aware of how much of a crisis the credit card industry is in right now. If you are also one of the many Americans who are having problems with credit card debt, you are probably highly interested in getting rid of those debts quickly.
You've probably heard of debt consolidation loans, credit counseling options and debt settlement companies. You might also have come across a strange article or news item where some lucky credit card holder was able to settle their debts for by paying an amount far lesser than their original debt. “Is that for real?”, you probably ask yourself. Actually, yes it is and here's why.
Credit card companies are now experiencing a large number of charge offs. A charge off is when the company has to consider a debt as a loss. Usually, a debt is written in the books of a credit card company as an asset. However, once the credit stops paying that debt, the credit card companies get worried. This is because, if the non payment continues for six months, they will have to writ it off as a loss. This means that the debt is very likely to remain unpaid. For obvious reasons, credit card companies want to avoid this as much as possible.
This is where a debt settlement arrangement comes in. As mentioned earlier, a debt settlement is when a debtor pays an amount far lower than the original debt to have it settled. Because credit card companies do not want to list debts as losses, they are more agreeablt to letting the debt be settled for a lesser amount than losing the entire amount instead.
This kind of arrangement is actually what is making debt settlement companies large profits right now. The ability of these companies to settle debts for far lesser than they are worth are enticing many people to sign up for their service, even with their high upfront costs and risky practices. What most consumers don't know is that, debt settlement arrangements can easily be arranged by the consumers themselves. There is really no need for a third party negotiator.
If you have a large credit card debt and you are having some trouble paying it off, you should probably call up your credit card company and see if you can get a debt settlement arrangement. The chances are actually very good that you can actually have your debts forgiven while only paying around fifty to seventy percent of the original debt. Sounds great? It is but you should know that by going into a debt settlement agreement, your credit score will take a big hit. The record will also stay with your score for seven years which will greatly stifle your ability to take out a loan.