Credit card debt can snowball and result in financial stress as you struggle to manage the combination of high interest rates, which is like doubling down on your problem by trying to borrow yourself! A common way of addressing this issue is through credit card restructuring, which allows people to alter the repayment plan for their debt in a more amenable form. Yet, as much as good Credit Cards Restructuring can offer, several myths swirling around could prevent people from using this powerful means. This is important because when it comes to your financial future, you should make decisions based on facts and not myth.
Credit Card Reprogramming = Debt Settlement
Although there are numerous misconceptions around this, one of the most common is that credit card restructuring and debt settlement are synonymous. While they are both involved in negotiating with creditors, they are two different processes.
Debt settlement:
This option includes working with creditors to settle a debt for less than what you owe. It can damage your credit score more intensely for longer and is usually viewed by lenders as a recourse before declaring bankruptcy.
Credit Card Refinance:
Changing the existing debt from interest rates and payment schedules to make it more affordable. This is usually less damaging to your credit scores and often a first step taken before the debt spirals out of control.
Reworking Credit Card Debt Destroys Your FICO Scores
This credit card debt restructuring myth hits at many fears people have about their financial status. However, it is true that any changes to your credit arrangements can affect your score; restructuring credit cards generally have less of an impact than most people would guess.
Temporary Dip in Credit Score:
Refinancing your debt may cause your credit score to drop for a short period of time. This is because the way debt restructuring probably entails closing accounts, or freezing your account and stop making payments on it, which can lower credit utilization percentage and average age of an active consumer trade line.
Long Term Benefits:
Long term benefits are more important than the immediate… It can help with removing debt obligations, which is a good way to build your credit back up over time. It helps to show creditors that you are committed towards managing your debt, which has positive implications for the credit profile.
Restructuring is for Financially Distressed Only
Most individuals think that credit card restructuring is reserved for those who are already in a financial bind or have reached the edge of bankruptcy. The reality is that restructuring can be a financially savvy move for someone trying to get their debt under control.
Prevention:
Restructuring can be used as circumspection to avoid falling into financial distress. However, if a change in income, rising interest rates, or unexpected expenditures make it hard for you to keep up with your obligations every month before finding one that works better, it may get advantageous restructuring.
Did you know that financial planning is strategic and not just for a time of crisis? Paying the bills on time and wanting to lower your interest costs or get out of debt faster can all be reasons within an overall financial plan for carrying out a restructuring.
Conclusion
Credit card balance restructuring is a powerful way to finance debt, but it faces any number of misunderstandings due unsound belief. Clearing the misconception, proposed above myths here before making you develop a presumptive mindset against restructuring which might be helpful and could have deepened your beliefs.
