Using Debt Settlement to Cut Credit Card Debt: Pros and Cons

You can use a settlement option to cut credit card debt, but this is not always the best option you have. Consider all the downsides of consolidating prior to looking into your options. You may find the downsides are too great to go through the process. On the other hand, you may find the benefits are great enough to counter any concerns you have about the challenges posed by consolidation. 

Con: Simpler Options May be Available

If you can change your financial decisions and pay off your debt on schedule, it is always the best option. For example, you may have gotten yourself into debt by overspending. By cutting back your spending and making lifestyle changes, you can successfully pay off your debts without the hassle and cost of settlement. This will save you money and save your credit in the long term. It will also help teach you the tools to prevent credit card problems in the future.

Con: Cheaper Options may be Available

Look into the real costs of settlement. You may hear that you can save thousands of dollars through settlement, but this is not always the case. Most individuals choosing to settle a debt will be using a new loan in order to do so. You can take a new loan from a settlement company and pay off all of your credit card balances. But you will still have to pay the new company, and this rate can be exponentially higher than your original credit card fees. Add to this the loan origination costs, and you may find yourself worse off than before the settlement.

Pro: It can Save a Credit Record

You may be in a situation where you have few options. For example, if you have a large debt and have recently lost your job, you may be facing default on your cards or, perhaps worse, default on another loan due to your credit card debt. In this case, it may be necessary to think short term. By settling the debt, you can buy yourself time with your new loan. You can ensure the new loan has low monthly payments or a grace period to help you get back on your feet. In this case, avoiding default becomes the primary concern, and a settlement can help you do just that.

Pro: It can Save Years of Stress

Some people who find themselves in credit card debt just want to be done with it. They may have made bad decisions, been suffering from a low income or otherwise unable to keep their finances in line. Rather than spending years in negotiations with the lenders trying to pay off the debts, they would prefer to settle it all and be done with the process. In this case, settlement can achieve the goal. If you have the money to settle out of pocket without using an agent, settlement will save you years of stress and lots of money over paying off the cards on time, in full, plus fees.


What will happen to unpaid credit card debt if I leave the country?

Unpaid credit card debt does not simply disappear because you cannot pay it. If you leave the country, the credit card company you owe will likely send your debt to collections. Collections officers will contact your known acquaintances, including your former place of work or your family, in order to get you to pay. Each state has a statute of limitations on credit card debt, but this limit is typically in excess of five years.
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