How To Get Out Of Student Loan Debt Without Paying
There are a few options for getting out of student loan payments. Your loan, job status and sometimes even the school you attended will play a role in determining your eligibility for these programs:
For most options, you will need to make qualifying, timely payments each month. However, even then, not everyone qualifies or receives forgiveness. For instance, less than 1 percent of Public Service Loan Forgiveness applicants were approved and considered eligible.
You cant have a defaulted loan forgiven, but defaulted loans may qualify for discharge, depending on the loan and the program.
How To Negotiate With Creditors
When youre negotiating with a creditor, try to settle your debt for 50% or less, which is a realistic goal based on creditors history with debt settlement. If you owe $3,000, shoot for a settlement of up to $1,500. However, you will start your negotiations by offering to pay an amount significantly less than 50%, in order to give you and the creditor room to negotiate.
Be sure to let the creditor know that youve set aside some money to make payments, whether its a lump-sum payment or a payment plan. This may give you an edge in your negotiations. If you do enter a payment plan, ask whether the creditor will lower the interest rate on the debt to ease your financial burden. During your negotiations, maintain a written record of all your communication with a creditor. Last but not least, keep your cool and be honest. Being emotional and untruthful wont help your cause.
Keep in mind that most creditors will not settle a debt unless youre seriously behind on making payments. Furthermore, if youre negotiating with the original creditor, they may insist that you pay as much as 80% of your overdue debt.
Is Debt Settlement Really Worth It
Debt settlement is a practice that allows you to pay a lump sum that’s typically less than the amount you owe to resolve, or settle, your debt. Paying off a debt for less than you owe may sound great at first, but debt settlement can be risky, potentially impacting your credit scores or even costing you more money.
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Who Will Hate It
If this is the case, you need to contact a credit counseling agency. Theyll help you set up a repayment plan instead of helping you pursue debt forgiveness.
Want to see if you can repay everything you owe to avoid credit damage? Debt.com can help you connect with a certified credit counselor for a free debt evaluation.
Understand Why Credit Card Companies Negotiate
If you’re going to try and negotiate with a credit card company, then you should know what often motivates them to do so. Credit card companies, many of which are owned by banks, have several priorities.;The first is to generate profit for the parent company and its shareholders.
When it becomes evident that someone may be unable to pay his or her balance, a shift in the credit card company’s;priorities happens that can work to your advantage.;The bank or credit card company becomes concerned with getting as much of the balance back from you as possible and closing or restricting your account.;This allows them to avoid charging off the entire amount on their income statement, which would cause their stock to fall, management to get lower bonuses, and perhaps even dividend payments to shareholders to be reduced.
Absent some sort of unique set of circumstances, a bankruptcy filing would be the worst-case scenario for the credit card company because it stands to lose everything it has extended you.;It means that they may be willing to forgive a large portion of the debt balance in hopes of getting back something rather than nothing.
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What Other Debt Relief Options Are There
If debt forgiveness isnt possible, you can choose to go with an alternate debt relief option to get your debt under control. Debt consolidation is a common option when you cant keep up with payments or the amount you owe is snowballing because of high interest rates. Under debt consolidation, you typically take out one loan with a lower annual percentage rate or more favorable terms to pay off your existing debt. You typically need a credit score of at least 580 to qualify for a debt consolidation loan.
You can also work with a to create a debt management plan . With a DMP, you can consolidate your monthly payments and potentially lower your interest rates. Plus, your credit counselor can help keep you accountable for sticking to your plan and making on-time payments.
Additionally, you can contact your creditors and possibly work out a payment plan so that your monthly payments are more manageable for your financial situation. You can also try to negotiate a lump-sum payment to pay off your debt without the assistance of a debt settlement company.
Good Ways To Find Relief Versus Bad Ways
The right debt relief solution will help you reach zero without creating new financial risks or damaging your credit. When it comes to bad ways to seek debt relief, there may be some circumstances where using one of these solutions would be the best option. However, you should exhaust every other option first before you consider these last resorts.
|Good Ways to Find Debt Relief||Bad Ways to Find Debt Relief|
Thats just one debt. Now think, how long will it take to pay all your debts off? If you dont like the answer, its time to find debt relief.
If you need help finding relief, call or complete our form to speak with a certified credit counselor.
On the other hand, if you still want to try paying off the debt with regular payments, follow the steps below. They will increase your chances for success.
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What Is Debt Forgiveness In Canada
learn more about the minimum payment trap.
The sooner you get on top of your debt, the better. Once the money you owe becomes overwhelming, it can be challenging to earn enough to make minimum payments. Increased interest charges and late payment fees add up and creditors may raise your interest rates too. As the amount you owe increases and as you begin to miss payments and max out credit cards, your credit score can be reduced significantly.
While we dont exactly have debt forgiveness, Canada does have non-profit services and Licensed Insolvency Trustees in every province and territory. These professionals can help with finding solutions to get out from under the crushing load of heavy debt.
Frankly speaking, there is no easy solution. Even with help, this is going to take time and effort on your part. Aside from extra stress, consequences for spending outside of our means can include the need for a spending freeze and a negative impact on your .
Ask Questions About The Credit Card Relief Packages They Offer
While your credit card company may offer up one or more options, have a list of questions prepared in advance. You want to make sure youre completely comfortable with the terms before you agree to these options.
Here are key questions to ask:
Note: that the recently passed Coronavirus Aid, Relief, and Economic Security Act places special requirements on companies that report your payment information to credit reporting agencies if they provide payment relief due to the coronavirus pandemic.
- Will I lose the ability to charge anything to my card if I enroll or request relief?
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Other Important Notes About Collection Agencies
- You may be able to take action to stop calls from collection agencies and in some instances, creditors, debt buyers and law firms
- A creditor can only assign your outstanding account to one collection agency at a time
- Some law firms in Canada operate in virtually the same manner as a collection agency
- If your debt remains unpaid for more than six months, a collection agency representing your creditor might be prepared to negotiate a one-time payment for less than one hundred per cent of the outstanding balance; typically, the older your account the more approachable a creditor might be
Why Do People File A Chapter 7 Bankruptcy Case
There are many reasons to file bankruptcy. Some of the common reasons people file Chapter 7 include:
Unemployment or a temporary decrease in income
Accident injury or sudden illness that results in substantial lost wages
Medical bills that the person cannot pay
Death of a spouse or family member
Loss of a business or downturn in business
Too much credit card debt
Poor financial management skills
Foreclosures or repossessions
Debt collection lawsuits and personal judgments
The Bankruptcy Court does not judge a person for why that person needs to file for debt relief. The Chapter 7 trustee assigned to your case does not judge you either.
If a person cannot pay their debts for whatever reason, that person may qualify to file a Chapter 7 bankruptcy case if they meet the income requirements to file a Chapter 7 in their state.
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What Practices Are Off Limits For Debt Collectors
A debt collector may not:
- Contact you at inconvenient times, for example, before 8 AM or after 9 PM, unless you agree to it.
- Communicate with you at work if you tell the debt collector your employer disapproves.
- Contact you after you send a letter to the collector telling them to stop, except to notify you if the creditor or collector plans to take a specific action.
- Communicate with your friends, relatives, employer, or others except to find out where you live or work.
- Harass you with repeated phone calls, profane language, or threats to harm you.
- Make any false claim or statement that you will be arrested.
- Threaten to have money deducted from your paycheck or to sue you, unless the collection agency or creditor intends to do so and it is legal.
Why Does My Credit Score Matter
There are people besides lenders who are permitted to look at your , such as landlords, potential employers, and insurance companies. If you are not planning a move, seeking employment or hoping to borrow money, your credit score may not matter too much, right now. If your debt is overwhelming, taking a hit might be worth it. It takes time and persistence, but you can always build it up again later.
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How Does It Work For Credit Card Debt
Benefits Of Diy Debt Settlement
The primary benefits of pursuing a do-it-yourself debt settlement revolve around cost. A DIY settlement avoids the fees you might pay to a professional debt settlement company.
A debt settlement company may charge fees totaling 15% to 25% of the settled amount. So, if youre settling a $10,000 debt for $5,000, you could be hit with a fee as high as $1,250 or even more.
If you choose to negotiate a DIY debt settlement, you dont relinquish your personal control over the timing of the process.
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The Credit Card Company Considers You Uncollectibleand Writes Off The Debt
If you stop paying on your credit card debt and become seriously delinquent, the credit card company will likely write off the debt and consider you uncollectible. At that point, the company takes your debt off it’s books. However, this offers no benefit to you, because a write-off is not debt forgiveness. The credit card company simply registers the debt as a lossbut the debt still exists.
A debt owed to the credit card company is an asset of the credit card company, and like any other asset, the creditor can sell the debt to a third party , which can then collect the debt from you. The third party debt collector can file a lawsuit to collect the debt. Once the collector receives a judgment against you, it can use the judgment to garnish money out of your paycheck or your bank account. The collector can also try to obtain a judgment lien and use that to seize your property and sell it to satisfy the debt.
If you end up in this situation, remember that certain types of income are exempt from garnishment, like Supplemental Security Income , and certain types of property are protected from collection. If the creditor can’t get your income or property, the judgment is essentially meaningless.
Know Your Negotiation Options
Before negotiating with a credit card company on your own, you should get familiar with the types of settlement options that are typically available to consumers. If the credit card company is willing to entertain the idea of a debt settlement, then the odds are high that they will want to make one of the following arrangements.
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How To Find Credit Card Debt Relief In 3 Easy Steps
Debt relief refers to any solution that minimizes the burden of paying off . The goal is to reduce or eliminate interest charges and fees so you can pay off the balances faster. In many cases, you can pay less each month and still get out of debt faster than you can with traditional payments. Essentially, you find a more efficient way to pay back what you owe that works for your finances.
But every financial situation is different, and there are multiple ways to get out of credit card debt:
So, how do you know which solution is right for you? The answer is through consumer credit counseling. And Consolidated Credit is here to help you zero in on the right solution for your unique financial situation using these three steps.
Debt Affects Your Credit Score
Not only is it wise to remain debt free for your own bottom line, holding on to high balances negatively impacts your credit score.
To maintain a high score, your account balance should be under 30 percent of your available credit limit, says Lucy Duni, a consultant that works with TransUnion. And many personal finance experts advice keeping your credit utilization as close to zero as you can.
Timely payments are also vital. If you fall behind and skip a billing cycle, your creditor will report the delinquency after 60 days to the three major credit reporting bureaus and your score will drop noticeably.
Miss more payments and youll see a dramatic downturn in your credit score.
And those negative marks dont fall off your credit reports for a full seven years!
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What Are The Side Effects
The most common side effect of debt forgiveness is credit damage. In the case of credit card debt settlement, the negative remark will stay on your credit seven years. The negative item should drop off your credit seven years after the date of final discharge. You should check your credit every year to make sure old penalties drop off. Otherwise, you need to have them removed.
The effect of the negative item in your credit report is a lower credit score. This may lead to rejected loan and credit applications i.e. lenders wont approve you for new credit. If you do get approved, you can expect to pay higher interest rates. This effect is only temporary. In fact, it wont even take seven years to get back to approvals at good interest rates. There are steps you can take to rebuild your credit once youve recovered and regained stability.
Another potential effect of debt forgiveness is that it would also close your account if its still open. But as stated before, forgiveness is best used once your accounts are already in charge-off status or sold to collectors. So, this usually isnt a concern.