Massive Credit Card Debt? How to Reduce Credit Card Debt Through a Settlement Program

If the hefty amount of credit card debt has stressed you completely, debt settlement is the rescue. The magic word to reduce your credit card debt is negotiation. Debt settlement companies negotiate with the creditors to reduce the debt in return of a lump some payment. Debt settlement is indeed a wise alternative against bankruptcy. The latter might provide a temporary relief to escape the calls from credit card companies and collection agencies, but costs your dearly in the long run.

Bankruptcy is more of an emotional decision than a practical one. You might feel frustrated and resort to bankruptcy but patience and perseverance to debt freedom will lead you to the right solution. Bankruptcy is strongly discouraged by the federal court as an overwhelming population started resorting to it as the final means to debt relief. The creditors and the financial institutions are undoubtedly the largest supporters of the strict bankruptcy laws, owing to astronomical default accounts.

Debt settlement programs collect your financial statistics and tailor a customized program to eliminate the debt. It sets a target to negotiate for 50-70% waiver using their inbuilt tools and calculators. Once the customer is convinced with the program, they are advised to stop making the minimum monthly payment on credit card. Multiple credit card payments are consolidated into one and the amount saved is accumulated in a trusted account. This amount is intended to include two components:

- The forgiven amount of debt to be paid to the creditor after negotiation - The fees of the debt settlement company, which varies from 5% to 15% of the total amount.

The debt settlement company negotiates with the credit card company based on the willingness of the debtor to pay the debt but inability to make full payment. Lenders also find it a profitable deal to get back something rather than nothing. As soon as a balance is reached between the debtor's and creditor's deal, an agreement is made to eliminate the debt by a percentage. The creditors generally waive off the late fees, over due payment or reduce the interest rate, thereby eliminating the debt by 50-70 percent. The debt settlement company pays the creditor the amount saved in the trusted account. Creditors can choose to inform the credit bureau regarding the payment to be "settled" or "paid-in-full". The former has a negative impact on your credit score but it can certainly be improved over a period of time. Overall it is a wise decision to get rid of the debt in 2-3 years instead of prolonging it for 20-30 years making the minimum monthly payment only.

Finding legitimate debt settlement companies is not that difficult but consumers must know where to look. It would be wise to utilize a debt relief network that will qualify the companies for you and ensure that they are legitimate and have proven themselves. To locate the top performing debt settlement companies in your state check out the following link: