Posted: April 10th, 2012 | Author: Joe | Filed under: Credit, Debt, Tips | Tags: Credit Debt, Debt Negotiation, debt settlement, debt solutions | 6 Comments »
If you’re one of the millions of credit card holders who has found themselves buried in credit card debt with a balance you can’t hope to pay down, then you may be wondering if you can Negotiate Your Credit Card settlement yourself. Well, it is possible to do, but it’s not easy.
3 Ways To Negotiate a Credit Card Debt Settlement Yourself.
The first thing you need to consider is what kind of arrangement you are going to seek. Let’s be honest, you’d like your credit card company to forgive all your debt and pretend it never happened, but short of bankruptcy, that isn’t likely to happen.
Once you’ve accepted the reality that you will need to pay something, you need to determine what that something will be. Here are 3 possible debt payment solutions to offer to your credit card company when you make the call.
I. Lump-sum settlement.
This is by far the easiest to understand and to sell to your credit card company, but it’s often the hardest to carry out, because you need a large sum of money available.
Since most credit card issuers aren’t going to negotiate until you are behind, one strategy is to stop making payments to the credit card company and put that money (and as much extra as you can afford) into a savings account for a few months.
This is what many debt settlement companies do for you, or at least it’s what they say they will do for you. In many cases, they hold the money and let the credit card company come after you for the full debt owed anyway. It’s a big reason why debt settlement is not a good idea in many cases.
If you have access to a chunk of money, they you can make an offer to your credit card issuer for a 1 time payment that is less than the full amount you owe.
WARNING: This technique will likely hurt your credit score, but then again so will having a high debt balance and not paying it off…
II. Workout arrangement.
This is a much easier option to carry out than the lump sum. The Workout arrangement is when the bank agrees to freeze your interest payments and late fees while you payback your balance. This is also the most ethical solution in my opinion, because you’re telling the credit card company that you will meet your obligations and pay back what you owe, as long as they agree to stop pushing you back under while you do it.
WARNING: You will most likely no longer be able to use your credit card, since the bank will probably lower your limit. This is a good thing in the long term though, since it will keep you from racking up even more debt. However, the lower credit limit will increase your debt-to-income ratio, and lower your credit score.
III. A Forbearance Program.
This one is probably the easiest solution to sell to the credit card company, but not the best for your bottom line. A forbearance program is an agreement by the bank to pause your payments and interest fees while you get your finances back on track. This is like taking a timeout to gather your resources for the next play.
The next play though is usually getting back on a payment plan in which you agree to pay the full amount owed and any interest and late fees accrued – forbearance is not forgiveness.
Final thoughts.
Whichever solution you choose, keep in mind that these are tough times for everyone – credit card companies included. They can’t get blood from a stone and they know that. Credit card holders still have a lot of leverage and everything is negotiable. Job loss and negative home equity have put the squeeze on banks trying to collect full payment.
You can use one of the debt solutions from above as a starting point, then see what else you get bargain down in the process. For example, you might get the bank to forgive all late fees and interest fees and give you a forbearance if you agree to pay the full principal. It all depends on your situation, and is up to the individual creditor.
Regardless of which solution to choose, be sure to get your credit card issuer’s agreement in writing before you send them any money.
Also, be sure to read How to Negotiate Your Credit Card Debt for more detail on the actual process behind making the call.
…and for your own sake, stop living beyond your means or you’ll find yourself back in the same place further down the road. It’s the number 1 reason why Debt Settlement And Loan Consolidation Don’t Work.
Related Posts:
Posted: December 24th, 2009 | Author: Joe | Filed under: Credit, Debt, Tips | Tags: debt collector, debt management, Debt Negotiation, debt settlement, getting out of debt | 3 Comments »
If you find yourself in a tough financial situation and are considering seeking the help of a professional credit counselor, there may be good news for you.
Since the credit crunch of 2008, and the current recession have led to historic bankruptcy and foreclosure rates, help is a little easier to come by. That’s the good part of this financial mess we are in – the social stigma has been removed. It’s now easier than ever to talk about money problems because it seems like everyone has them.
Here are 10 tips to help you talk to your credit counselor.
1. Determine what services you need.
Terms like credit counseling and debt counseling cover a wide range of services, but they can be broken down into 2 broad categories: 1. counseling and education, 2. debt reduction or negotiation. Credit counselors typically offer the counseling and education services, while debt management and debt settlement agencies offer the latter. You also need to be more wary when dealing with debt management and debt settlement agencies in general as they can harm your credit score and often simply don’t work
2. Make sure the counselor meets the legal requirements.
If you’re filing chapter 7 or 13 bankruptcy, a 2005 law requires you to complete an instructional course in personal finance management before your debts can be discharged. Before you sign on with a credit counseling agency, be sure they’re on the approved list of agencies to cover the legal requirements.
3. Verify they are the right kind of nonprofit status.
The term “nonprofit” is a bit like the term “organic” – everyone has an idea of what it means to them, but there are loose (if any) restrictions on who can use the term. Make sure your nonprofit counseling agency is listed under Section 501(c)(3) of the Internal Revenue Service Code. You can check the listing at the IRS charities website.
4. Verify their accreditation.
The term “accredited” is a lot like organic and nonprofit (see above). Make sure the counselor is accredited with the National Foundation for Credit Counseling, or the Better Business Bureau.
5. Are all the counselors trained and certified?
An old, but effective trick in advertising is to imply that all members of an organization are professionally trained and certified while it may only be a small subset of those employed. Ask the pointed question: “Are all the counselors trained and certified?”, followed by “and what kind of training and certification is that?”
6. Get (and check) references.
Be sure to ask the agency directly, but also check on the Better Business Bureau website.
7. Find out how this will affect your credit score.
The truth of the matter is that your credit has already been hit by late payments and the like, but what you’re looking for from the counselor is an honest commitment to help you make the most of your current situation. If they promise to guarantee to clean your credit history, or make an everything for nothing kind of promise – run.
8. Know the costs.
It should be a simple, straightforward cost. If they start down a complex road of “possibilities” or a menu of fees and percentages – run. If they say they will hold your payments, and that you should stop paying your creditor yourself – run.
Legitimate nonprofit counselors will charge something less than $100 per hour for counseling, and some may be free! But if things seem too good to be true, it probably isn’t true.
9. If the price $0, or close to it – find out why.
Sometimes credit card and mortgage companies provide funding to counselors. This can be ok, but you should be made aware of it if this is the case. The important thing is that the counseling agency is working for you. If they seem to be giving advice that helps your creditors at your expense, then there may be a conflict of interest.
10. Make sure the service is what works for you.
Whether the counseling is done in person, over the phone or on the Internet doesn’t matter as long as it’s what works for you.
Related Posts:
Posted: December 11th, 2008 | Author: Joe | Filed under: Credit, Debt, Economy | Tags: Debt, Debt Negotiation | No Comments »
Times are tough for all of us right now, and it’s especially tough for lenders. That’s good for borrowers. With the credit crisis, lender’s are in a tight spot and that’s why it may be the best time to negotiate your debt with them- ever!
According to the Federal Reserve, charge offs by credit card companies jumped 42% this year. Credit lenders don’t like to write off too much bad debt, so if you can convince them you will become part of that bad debt if they don’t work with you, it may give you the opportunity to start digging out of credit card debt and get back onto the road to positive net worth. Here’s a look at just how bad it is:
- According to the American Bankruptcy Institute, personal bankruptcies have also increased about 40% from last year.
- According to data from LPS Applied Analytics, every foreclosure is now a loss of 44% of the original amount of the loan. That’s a 29% increase from a year ago.
All of this means your lender is much more likely to forgive some of your debt, or decrease the interest rate than they were a year ago. Of course, you have to have the right amount of distress to qualify for the best deals: you will likely have to be struggling, but just enough that a change in terms will help you pay back more of the debt or pay it back sooner.
Still, you never know unless you try. 
Related Posts:
What others are saying