Who would want to face life after leaving college with credit card debt? Nobody prefers credit card debt, and we know that debts have a drastic impact on individuals with fixed incomes. As a college student, you must have been very casual about your finances and this may be the reason that you landed up in credit card debt. But the most important question is whether or not you should seek credit card debt settlement, or manage your personal finances sans settlement. Certainly you should opt for the latter option but if you tried out the options and still didn’t get any positive result, you should opt for the option called debt settlement. Here are some tips that you need to follow before settling your credit card debts as someone seeking a college education online or on campus.
1. Paying the Principal Amount on Your Credit Card Debt
If you’re a student who dreams about settling your loans for pennies on a dollar, you’re still living in the fantasy world, far away from real-life personal finances. Remember that lenders are never going to settle for an amount that is less than what you owe on the principal balance. Though the principal may be waived off and reduced, you likely won’t be able to drastically reduce the amount. Some federal loans won’t be able to settle for less than the principal amount borrowed as the U.S. Department of Education already offers the Income-Based Repayment Plan for the student loans. The private lenders don’t offer the income-based repayment plan and therefore you can settle your debts and release your financial woes.
2. Don’t Overpay Student Loans
If you’re a student who has accumulated a large amount of interest rates and penalty fees on your loans, you have to do some math and calculations in order to check whether or not you’ve overpaying on the loans. You should review your credit history as it is mostly seen that there are mistakes. Review the credit report so that you know that there are no mistakes in your report that can pull down your score in the long run. Any sort of mistake should be reported to the lenders so that they may deduct the appropriate collection fee and interest rate while settling your debt.
3. Calculate the Compromise Offer and Close the Deal
If the student feels that there is no other option than debt settlement, you should try and prove that the collection fees and the interest rates have multiplied so rapidly that it may become impossible to repay. Remember that the borrowers are usually in a better position to settle when they offer a lump sum amount. Once the student loan has been settled, you’ll certainly hurt your credit score but you need to get back on track by taking steps through which you can repair your credit.
So, when you feel that debt settlement is the only option through which you can repay your student loan or credit card debt, you can consider it as viable option, and keep the above points in mind and take an informed decision. However, don’t forget that you may have to pay taxes on the amount that you save through debt settlement as this will be considered part of your income by the IRS.
About the Author: This article was written by guest author, Marlon Powell, a financial writer.
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