There are a lot of ideas floating around regarding credit card debt relief and a lot of them can sound plausible. The problem in believing these myths is that, at best, there will be no change in your debt situation, or worse still, you could be getting into more trouble financially.
Seeing as it can be hard to distinguish fact from fiction when you desperately need debt relief, I have prepared a list of some popular myths and why exactly they are not true. Here goes:
#1: You can have your Credit Balance halved for Any Reason
Most of this statement is true until you get to the ‘for any reason’ part. Credit card companies do want to get some of their money back and that is why such negotiations can be entered into. However, the reason for reducing your balance has to be reasonable, for instance, if you have lost your job, or you have medical problems.
#2: The Debt will Last forever if you don’t Pay
It can certainly feel that way but it isn’t entirely true. There is a statue of limitations beyond which the credit card companies can no longer try to collect. The conditions are that you haven’t made payments on the account for a certain number of years (the number varies based on the state) so that the debt cannot be enforced in court. However, if you make any payments after those years, you negate the statue of limitations argument.
#3: If you can’t Pay, you should Settle or Declare Bankruptcy
Don’t be so quick to take these options when you are backed into a corner. If you lose your job or fall ill, you could ask for leniency from your creditors where they could let you make smaller payments or none at all for a while until you get back on your feet.
Credit counseling organizations are another option to help you get your finances in order. They will work with you to manage your personal finances in such a way as to get your repayments back on track.
#4: Debt Settlement will not Affect your Credit Score
Yes, it will. In fact, debt settlement could hurt your credit score as much as bankruptcy. Debt settlement companies often advise clients to skip payments, which hurts their credit score. Further, if you are successful in getting the settlement, and it gets reported, it will hurt your credit score. So debt settlement is not a get-out-of-jail-free card.
#5: Debt Settlement Companies Require Payments Upfront
Only the ones that are trying to scam you! The rule is that the money you set aside to pay the debts along with any interest earned belongs to you until the debt settlement company has successfully settled your debt. Further, there is a period within which you can withdraw from the contract and not be penalized in any way. You should also get your savings back within that period.
If you want to use a debt relief company, get one that only asks for payment after the job is done and not a minute earlier.