Credit settlement is a process in which you will settle your debt by paying some amount to the lender and by having any kind of agreement with him/her. There are basically three types of settlements, lump sum, workout, and hardship. These settlements are done when a person is about to finish his/her debt repayment, or they are done at the time of settling down any debt. With a settlement, you will get some comfort. It will become difficult sometimes if you have taken debt from any company, but they will allow you some kind of compensation in the repayment. Knowing more about this will help you a lot, and you should definitely get into debt relief services.
The first one is the lump-sum Settlement. In this Settlement, you have to pay a considerable amount for the repayment of the debt. You can get a discount on this kind of Settlement as you are paying back the full money. But, your record will speak as Settlement. In the workout settlement, your credit card issuer will lower your interest rate so that you can quickly pay the debt. He/she can also waive the interest altogether. These were just the summary of two settlements; let’s discuss three of them in brief.
- Lump-Sum Settlement
This is the most common kind of Settlement used in repaying your debt. This is because everyone wants to get a discount on their repaying amount, and this is the only Settlement that allows them to pay less money. In the case of credit cards as well, you will get this thing, but you have to talk to the issuer first regarding this thing. You will pay less amount than the original amount and inform the issuer of that. You just have to face one problem: your credit report will show that the account has been settled by paying a lower amount than the remaining amount.
- Workout settlement
A workout settlement is more related to the interest rate rather than the amount of the debt. In this kind of Settlement, you have to make the credit card issuer lower your interest rate of the debt. He/she can do that or can temporarily waive the interest altogether. There are some other ways which can be sued by the bank to keep up with the Settlement, such as they will reduce your minimum payment or waive your past late fees on your account. The car issuer can close your account by showing up about the arrangement, and it can damage your credit report more. Your credit report has already been damaged by repaying the debt late.
- Hardship Agreement
This is a kind of emergency program. This is because you will take advantage of t when you are in a kind of challenging situation. There are so many situations in which people make this type of Settlement, such as you will suddenly lose your job or any kind of sudden injury or illness happened to you. At that time, the hardship agreement works for you as it will provide you a temporary financial setback. The things done in this Settlement will be temporary, and your card issuer can start taking lower interest from you, suspend late fees, or reduce your minimum payment. All these things will be made for a certain period of time. This agreement is also risky for your credit history, and it can make it risky.
Settlement becomes important sometimes for everyone as they want relief from the debt, and these settlements can provide them that. But, it affects your credit report. Three types of credit card settlements have been discussed above; go through them.