Real Consumer Credit Card Debt Counseling - Negotiate With Your Creditors For Reduced Debt Settlements

Before you get excited over the notion of reducing your consumer credit card debts by 50% or more as claimed as the many credit card debt relief services, you need to do a rain check on whether declaring bankruptcy may be a better option as some people may not be a good match for consumer debt reduction due to their financial circumstances and lifestyle needs.

After being over reliant on easy personal credit and overspending for years, many households have more than $10,000 in credit card bills and unsecured debts. With prolonged unemployment problems and a decrease in incomes, many consumers are now struggling with their debt payments. Furthermore, many people are not well versed in consumer debt management techniques, so do not know how to get out of debts effectively.

This has lead to the rapid rise of many consumer debt negotiation companies which are advertising widely to help people eliminate credit card debts legally. However, not all of these work for real and many just collect high fees without doing any constructive debt reduction for the unknowing clients.

So how do you avoid consumer credit card debt relief scams and choose a legitimate company to help you?

If a consumer debt relief agency propose to use debt negotiation in order to help you reduce the amount of outstanding balances owed to your lenders, do you know what is being involved? For example, say you owe lender-A a total of $10,000 including accrued interest fees and penalties levied for late or missed payments. Your debt negotiator intend to bargain for a final settlement of $5,000 which is highly possible if a major part of your account balance is made up of interest fees and penalties.

At first glance, this sounds very attractive because you can instantly wipe out half the amount you owe, and this makes it more motivating to quickly pay off the remaining balance because you can become debt free in half the time instead. Previously, it may take you 10 years to pay off this debt with a minimum monthly payment, but now you can do so within 2 years or less with a legitimate consumer debt negotiation program.

However, what is usually not highlighted even by BBB-certified consumer debt relief companies are the associated disadvantages with debt negotiation. The main critic is that your credit score will be seriously damaged in the process of debt negotiation. This is because you need to be behind on your monthly debt obligations, whether voluntary or not in order to get your creditors to be willing to enter debt settlement talks. Otherwise, if you have no problem paying on time every month, your creditors will feel no pressure to compromise on reducing your account balances.

In fact, they will prefer you to continue making monthly minimum payments for the rest of your lives and make them a nice profit through the 20% or higher APR charged on such debts. If you are not skipping your monthly debt payments, you will be required to do so strategically because the normal practice is for lenders to write off delinquent accounts after 180 days. After you stopped paying for a few months, your debt negotiation company will be able to bargain for a reduction on your debts owed and other favorable payment conditions such as reduced interest rates and so on. However, that also means multiple late payment remarks will be recorded against your credit report during this period.

If you are truly in financial hardship and are struggling to make ends meet, then you are probably skipping payments and experiencing credit damage. This does not make a difference for you but for others, you have to have a decision whether voluntarily not paying your debts to enter debt negotiation is worth it or not. The good news is that as long as you do not file bankruptcy or face home foreclosure, you can easily repair and raise your credit score to 700+ levels again within a few months.

Furthermore, it is estimated that your overall debt load accounts for around 30% weighing in the calculation of your FICO credit score. So as you quickly reduce your credit card debts through proper debt negotiation, it cancels out the negative infractions caused by the previous late payments.

Thus, worrying about bad credit should not deter you from using any proper type of consumer debt help to fight for a fairly reduced settlement. Whether you have bad credit now or not is probably secondary, since the priority now is to seek the fastest way to pay off your creditors and stop accruing more debts.

The most common complaints clients have against their debt settlement companies (even for legit ones) is that they are not transparent enough with the pros and cons about their consumer credit card debt reduction methods, especially on the fees involved. You will hear many claims about reducing your unsecured debts by up to 50%, but somethings after adding the debt negotiation fees, your total savings may wind up less than 10%. For some people with only $2000 to $3000 debts, it may not be cost effective to use any form of consumer debt counseling services that can cause bad credit damages to their FICO scores.

Furthermore, clients are usually not told anything about stopping their payments for several months consecutively and how their creditors may employ debt collectors to harass them with phone calls and house visits. An honest and legitimate debt settlement firm is more likely to advise you about such consequences and get you well prepared to face the after effects of their consumer debt relief methods. Otherwise, you too will feel duped and complain about such cover-ups about how debt negotiation works.

Indeed, many clients get angry when they start feeling victimized by debt collection agencies that call up every day non stop to make them pay up. Such debt collection harassment is something they are not prepared for and is the main deterrent for many people to proceed with consumer debt negotiations. You may be told that you can legally stop these calls from disturbing your family, but currently there are too much legal loopholes to stop these completely.

The worst type of consumer debt relief scams we heard of are those that advertise about letting you choose your own minimum monthly payments regardless of how much you owe your lenders. This is only done so to get you signed up for their debt negotiation program, and definitely not to your benefits at all. No matter what type of consumer debt reduction methods is being employed, you must make more than your current combined monthly debt obligations in order to see faster results, say becoming debt free within 3 years and not becoming a slave to your debts for the next 30 years. If you continue to pay a token amount every month, this is exactly what is going to happen.

Unscrupulous consumer debt counseling companies can offer you an "affordable program for several years and accepts whatever payment amount you choose, at the same time charging you an expensive debt management fee. They know that you will not be getting any true debt reduction at all, but that is not their problem. You will find yourself in the same financial situation before you sign up for such debt relief scams, except you are now several thousand dollars poorer paying for their fees.

A legit debt management company will review your personal finances to derive an optimal monthly payment schedule that is both aggressive in reducing your debt principals fast without causing you any difficulties in your monthly budget. They will also discuss both benefits and potential risks involved in using such consumer debt relief methods such that you are convinced that this is the best decision compared to filing for bankruptcy, taking out a secured debt consolidation loan, etc.

Do not rush into any type of consumer debt counseling without any due diligence. Take the time to research probably if you wanted a honest debt negotiator to reduce the amount of money owed to your creditors realistically. You have to be adequately educated on personal debt management to choose whether debt settlement, debt consolidation or bankruptcy will be the best way to improve financial hardship and become debt free again.