3 Ways To Negotiate a Credit Card Debt Settlement Yourself.

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.

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How to Settle Debts On Your Own.

If you want to settle your debts, but you don’t want to hire a debt settlement company, you have an alternative – you can settle debts on your own. Debt settlement companies don’t have special privileges that make them the only people who can settle debts. You also have the right to make this negotiation on your own.

Take Inventory of Your Debts

Settling your own debts means you’ll be responsible for saving up the settlement funds and negotiating with the creditors and debt collectors who handle your account. To get started, you should make a list of all your debts, the amount you owe, and how past due the account is. All your accounts may be current. Or, you may have some that are 30, 60, or 90 days past due. Other accounts may be in collection. It’s important to know where the accounts are in the collection process. Update the past due status of each account as it progresses.

Saving Up for Settlement

When you negotiate a settlement, you generally have to be able to pay the settlement in full within a few days. So, you need to have your settlement funds ready to access when you start making negotiations. For most people, this means setting aside several hundred dollars each month until enough money has accumulated to settle an account. The amount you save up each month really depends on what you can afford. The more you can save up, the faster you can settle your accounts.

Downside of Settlement

The downside of debt settlement is that you have to stop paying your accounts to make a settlement. That’s because creditors don’t have a reason to settle an account that’s current on all the payments. When you stop paying your account, you’ll begin getting phone calls and letters from your creditors demanding payment. This is a normal part of the process.

Making a Settlement Offer

When your accounts get 90 days past due, you can mention settlement to your creditor to see if they’re willing to negotiate. Some creditors automatically send out settlement offers once the accounts reach a certain past due status. The good part about these automatic settlement letters is that you won’t have to convince the creditor to settle, you’ll just have to negotiate the amount.

Accounts that are already charged-off or have already been sent to a collection agency can typically be settled right away. You don’t have to wait for these accounts to get any older. But, if you have the chance to settle a past due account that hasn’t been charged-off, settle that account before you settle an account that’s already a charge-off. That way, you avoid having an additional charge-off on your credit report.

Get your settlement offer in writing on company letterhead before you pay the settlement. This helps ensure that you’re making a settlement agreement with someone in the company who’s authorized to take a settlement from you. Then, once you have the settlement agreement in hand with the settlement amount, date of the settlement, and a note saying payment will satisfy the account in full, then you can make payment.

What Happens After Settlement

When your account is settled, your credit report will be updated to show the settled status. Check your credit reports by visiting AnnualCreditReport.com to confirm that the settlement status has been updated. Once you’ve settled all your accounts, you can work on improving your credit score.

Settled accounts will stay on your credit report for seven years from the date you went delinquent. Adding new accounts and positive payment history will increase your credit score over time. If your negative credit history keeps you from being approved for a credit card, try a secured credit card that requires you to make a security deposit against the credit limit.

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Congress Takes Aim At Debt Settlement Scams.

Two members of congress have introduced the “Debt Settlement Consumer Protection Act,” which seeks to reign in the fees charged by some debt settlement companies and require written disclosures of services before they are performed. The bill would also require debt settlement firms to offer the right to cancel for a full refund.

A typical debt settlement program requires the customer to make payments to the settlement company in exchange for services rendered by the company. Part of the payments are taken by the company to pay the various fees associated with the service, while the remainder is kept in an account administered by the settlement company.

Many disreputable debt settlement companies also require the customer to stop paying their creditors in a bid to make the lenders more willing to accept a lower overall payment, but this is a bad idea. Doing so will simply harm your credit score and could land you in court.

There is certainly a need for some form of regulation of the debt settlement industry. Since the recession began in 2008, the Council of Better Business Bureaus has reported more than 3,500 complaints about debt reduction companies. The complaints range from claiming that debt settlement programs don’t work to alleging that they led to even more debt, lawsuits and wage garnishments.

With all the sharks out there, it’s easy to be wary of debt settlement companies claiming to eliminate your debt for pennies on the dollar with no side effects to your credit, but that just isn’t possible. And perhaps worst of all is the fact that debt settlement companies charge you for what you can do yourself – for free!

Source.

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How To Negotiate Credit Card Debt.

If there was ever a time when credit card holders had leverage to negotiate a better deal on their credit card debt, now is the time!

With near record bankruptcies and unemployment, credit card issuers have had to write off a lot of uncollected balances. This makes credit card companies much more likely to want to work a deal with the credit card holder. I suppose it’s one of the silver linings to the great recession and credit card debt.

I should preface the remainder of this post by saying that while it’s a better time to negotiate the terms of your credit card debt with the issuer, it may not be easy. The idea is simple enough, but many issuers lack the staff required to deal with every delinquent account on a 1-on-1 basis, and they also can’t take a loss on every one.

So, how do you know if you may be able to work a deal on your credit card debt?

There is no hard list of criteria to determine who can and cannot negotiate a better rate, or a reduction of balance. But one of the sad but true facts of credit card debt is that most issuers won’t bend down to lend you a hand up until you’ve already been knocked down by your burden. It may seem nonsensical, but most credit card companies only start offering real solutions once you’ve fallen behind on payments and racked up serious fees and interest penalties.

Once the card holder has fallen behind 3 months or so, many companies begin offering forbearance or hardship programs that temporarily reduce interest rates and minimum payments. These programs typically last 3-6 months.

If you fall even further behind, you may be offered entry into a program to lower your interest rate or card balance for a year or more. This should be thought of as a second chance since further late payments can whack 100 points or more off your credit score and add even more fees and penalties. They could also send your account to a collection agency if you have stopped making minimum payments completely.

Debt consolidation and settlement companies are other options, but those can hurt your credit score even more and you may be better off doing things on your own.

Obviously, the best course of action is to avoid this situation completely and do everything you can to consolidate your debt on your own and pay it down ASAP.

Failing that as an option, you can press on with negotiating with your credit card company yourself.

Here are a few guidelines that may give you a shot at negotiating a better deal:

• Be clear and honest about the state of your finances and what you can afford. Any negotiation is a meeting on middle ground, where both parties are satisfied with the less than desirable situation. If you don’t approach the negotiation honestly, then the credit card company has no reason to trust you, and that means you’re stuck.

• Understand the timelines involved. Be aware of the credit card issuer’s definition of timelines. When is an account considered to be in default, and not just behind?

• Be willing to take a hit on your credit score. Whatever deal you get, it’s likely to have a negative impact on your credit score. Just know that going in, and you’ll have one less nasty surprise from the whole affair.

• Be proactive. Although the credit card company is unlikely to offer hardship programs until you start falling behind, you can start negotiating before that point – and you’re much better off doing so.

• Ask for a reduced interest rate. If you have a steady history of making payments on time, but you are finding it harder to do so then you may be able to work a lower rate. Even if this is only temporary, it will help free up some cash and let you gain some ground on paying your balance down.

• Ask for a pass on fees. Some credit card issuers are surprisingly open to forgiving fees associated with (slightly) late payments, or even balance transfers.

• Ask for an out on the total balance. Offer a lump-sum deal for a percentage of your outstanding debt. Try to get them down to 25% of your balance, but anything under 50% is a win.

• Get it in writing! ‘Nuff said.

• Get professional help. Go to the National Foundation for Credit Counseling locator page to find a Certified Consumer
  Credit Counselor nearest to you.

Lastly, be sure to stick to your end of the deal or you will have little recourse if the credit card issuer files a lawsuit, and they will be much less inclined to work with you further.

It’s not impossible to work out a lower interest rate, or a temporary rate freeze or even forgiveness of a certain amount of your credit card debt but it’s not like wavy a magic wand either. And you need to seriously examine your spending habits to make sure you don’t fall into the same credit card trap further down the road.

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