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Can I Negotiate My Credit Card Debt Myself

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Clever Ways To Crush Your Debt

Is It Worth Trying to Settle Credit Card Debt?

Last updated Sept. 29, 2022| By FinanceBuzz Editors

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Debt is a universal struggle. High interest credit cards, hospital bills, or student loans, car payments everyone knows the challenge. If you feel like youre drowning in it, youre not alone. A recent study shows that over 80% of Americans are in debt.

So how do you get out of it?

Crushing your debt is easier than you might think, as long as you have the right plan. It’ll take some work and dedication, but we’re here to help. Below you’ll find 7 clever ways you wouldn’t normally consider to help you crush your debt.

Imagine how great it will feel when you no longer have it looming overhead!

When Are You Better Off Working With A Debt Settlement Company

  • Who youre negotiating with
  • What you want to accomplish during the negotiation
  • If youre talking to a debt buyer, then youre usually better off negotiating the settlement on your own for two reasons. First, a debt buyer is the most likely debt holder to settle for a low percentage you dont need to be an expert negotiator to get a good deal.

    Second, on collection accounts that have been sold to a third party, you almost always want to negotiate pay for delete. Debt settlement companies always negotiate for accounts to be listed as paid as agreed. This wouldnt remove the collection account from your credit report.

    If your debts are still with the original creditor or with a collector working on behalf of the original creditor, then youre in a situation where youre usually better off working with a debt settlement company. These negotiations usually require more skill to get you out of the debt for a percentage of what you owe. In this situation, you usually just want to get out of debt for the least amount possible as quickly as possible. So, in this case, you want to call in the experts to get the fastest, cheapest possible exit from your debt.

    The Older Your Debt Is The Less Reason There Is To Settle

    Every state has a statute of limitations on how long a debt collector has to sue you in civil court to force repayment of a debt. The maximum statutes are 10 years. So, regardless of where you live theres no more than a 10-year window where a collector can take you to court to collect on a debt.

    You should check with your state Attorney Generals office to find out what the specific statute of limitations is for your state. If your debts are old and close to that statute, theres less reason to pay them anything. After 10 years they can still contact you to attempt to collect, but they have no legal recourse. And if you tell them to stop contacting you, they must honor that request.

    If you have any debts that over that statute and the collector is still bothering you, send them a cease and desist letter using the template you can find below. Just be careful to keep the wording close to what it says in the template. If youre not careful and you acknowledge that you owe the debt in any way, you can actually reset the clock on the statute of limitations!

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    A Debt Management Plan

    A Debt Management Plan is a tool offered by nonprofit credit counseling agencies that helps facilitate an agreement between a borrower and creditors.

    You make one consolidated lump payment each month to the nonprofit agency. The agency then sends that payment to your creditors, who might offer reduced interest rates on credit cards to 8 percent, maybe less.

    Another benefit of a debt management plan is that the monthly payment is calculated at an affordable rate based on the consumers budget. And credit score isnt a factor in qualifying.

    How To Negotiate Credit Card Debt Settlement By Yourself

    How To Negotiate Prices and Get An Even Better Deal

    If you find yourself crippled by credit card debt, having racked up charges that will be hard to pay off, you might be able to settle your accounts with your lenders for less than what you owe. And you might not need a debt settlement company to do it. Heres how to negotiate credit card debt by yourself.

    Settling debt means coming to an agreement with your creditors to pay back part of what you owe while being forgiven for the rest. If youre considering settling your credit card debt, youve probably already missed some payments, perhaps even several months worth. You may have already been referred to a collection agency. All of this puts a big dent in your credit score.

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    Settling Credit Card Debt Pays Off For Both Parties

    Why would a credit card company let you off the hook for less than what you owe? It simply comes down to whether they want some of their money back versus none of it. Credit card debt is unsecured debt, meaning its not tied to an asset like a house or a car. So if a persons financial situation gets so dire that they file for bankruptcy, its possible a credit card company wont see any of the debt repaid.

    Some people work with debt settlement companies to help them negotiate a settlement with credit card companies, but its also something you can do on your own. Debt settlement is not without its risks, however. Your credit could take a further hit and it could take years for it to recover, but its a definite option for debt relief. Heres what you need to know:

    Risks Of Diy Debt Settlement

    You may not be as great a negotiator as you thought. Debt settlement companies built their business around being able to save you money. They do not get their money without you saving yours. The creditor may low ball you, costing you thousands of dollars. It is up to you to find out what is the best option for your specific financial situation.

    A drawback to debt settlement is that it stays on your credit report for seven years, discouraging any lenders from giving you more credit. It also damages your credit score by 75-100 points, meaning that if a lender gave you credit, they would do so at a very high interest rate. For example, a 5% car loan might cost you 18% -20% because of debt settlement. That would be thousands more you must pay for a car because you have debt settlement on your credit report.

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    What Is A Credit Card Debt Settlement

    A settlement is when a credit card company forgives a portion of the amount you owe in exchange for you repaying the remaining amount. The remaining amount can be repaid in a single payment or over a series of payments.

    Keep in mind:

    • If your account has not already charged-off before you accept your settlement offer, then it will be permanently closed once you do accept the offer. This means that you will not be able to reopen the account and you cannot regain use of the card.
    • The settlement may be reported to the credit bureaus. While it isnât possible to say exactly how a settlement will affect your credit report, your settlement and payment information likely will be reported to the major credit bureaus as âsettled in full for less than the full balance.â This can stay on your report after youâve paid the settlement in full.

    Before deciding on a settlement: You can always reach out to your credit card company to see if they are able to work with you. According to the Consumer Financial Protection Bureau , âsome creditors might be willing to…waive certain fees, reduce your interest rate, or change your monthly due date to match up better to when you get paid, to help you pay back your debt.â

    You Might Save Money And Pay Off Debt Faster

    How To Get Out Of Paying Credit Card Debt | Gamez Law Firm

    InvestopediaForbes AdvisorThe Motley Fool, CredibleInsider

    Katie Miller is a consumer financial services expert. She worked for almost two decades as an executive, leading multi-billion dollar mortgage, credit card, and savings portfolios with operations worldwide and a unique focus on the consumer. Her mortgage expertise was honed post-2008 crisis as she implemented the significant changes resulting from Dodd-Frank required regulations.

    If you are in debt and cannot pay your bills, is a debt settlement program the cheapest way out of debt? You might draw that conclusion from the American Fair Credit Council , an industry association of companies operating in the debt settlement industry that have agreed to a strict code of conduct.

    Key takeaways from the 2020 report include that debt settlement provided, on average, $2.64 in consumer savings for each $1.00 fee assessed, and that nearly all offered settlements, over 98 %%, resulted in a decrease of the clients debt that was greater than the accompanying fees.

    “Debt settlement can save consumers money by allowing them to resolve their debts for less than the full balance, says Gerri Detweiler, co-author of the eBook, Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights. He adds: It can be a way out of debt for some individuals who cant afford to pay back the full amount they owe.

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    Be Aware Of Possible Disadvantages

    Negotiating a credit card debt settlement can have some downsides that you should be aware of before making a decision to do it.

    Depending on how it plays out, negotiating a credit card debt settlement can significantly lower your .

    Even before you enter into an agreement, companies may close your account or prevent you from using the credit line any further. The process can also temporarily lower your access to capital from other borrowing sources as you are now seen as a bigger risk.

    Other lenders may charge you higher interest rates to compensate for your heightened default probability. In some states, your insurance costs for things like automobile insurance might rise. The length and severity of these outcomes will be far worse with a bankruptcy filing, so it can still be worth it to go through with the settlement.

    It’s also important to note that forgiven credit card debt can be treated as taxable income. If the total debt forgiven is $600 or more, the lender will give you a Form 1099-C, Cancellation of Debt, to use in your personal tax filing. Do not try to avoid claiming this as the IRS will be notified of it by the lender.

    Your credit card company might not be willing to entertain or negotiate a credit card debt settlement. If not, it’s time to consider discussing your options with a bankruptcy attorney. In some situations, it’s far easier to rebuild your personal balance sheet after having your liabilities discharged by a court.

    How To Negotiate With Lenders

    During the Covid-19 pandemic, lenders may make accommodations for you, but you need to know how to ask for relief and negotiate your options.

    Reading time: 5 minutes

    Contrary to conventional wisdom, lenders are often willing to negotiate with customers who want to lower their interest rates, develop payment plans or pursue other arrangements to better manage their debt. Especially during the Coronavirus/Covid-19 pandemic, lenders may be more willing to make accommodations for you as long as you contact them to strike an agreement.

    If youre falling behind and unable to make your minimum monthly payment on your credit card or other debts but youve been a reliable borrower in the past, contact your lender to see if they would consider reducing your interest rate or finding another way to make your loan more manageable.

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    Ask For A Payment Plan

    If you are willing to start making payments immediately, your creditor may be willing to offer a payment plan. Your credit card provider wants your money. If they enter into a payment plan with you, they are likely to get more money than if you default or even if they let a debt settlement company negotiate.

    Your creditor will consider a couple of key factors when determining whether to offer a payment plan:

    • Your payment history

    The Minimum Criteria For Attempting Credit Card Debt Settlement

    debt consolidation loans

    Perhaps the biggest determinant of successfully negotiating settlements for less than full balance is making sure you meet the minimum criteria.

    Having the best process in the world won’t matter if the debt settlement process isn’t the right solution for you.

    If you don’t meet the minimum criteria for the debt settlement process, better to know that upfront so you can pursue other options.

    Here are the minimum criteria for attempting debt settlement:

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    Cancel Your Car Insurance

    We’ve got bad news. You could be wasting $500 every year on overpriced, second-rate car insurance. And you should probably cancel your existing insurance right now, because there’s something much better.

    This new tool from FinanceBuzz can tell you if you’re overpaying for your car insurance in just a few clicks. We match drivers with companies that report saving drivers up to $500 or more per year when they save! Each drivers savings will vary by driving history and how many discounts youre eligible for. And once you try it out, you’ll never have to look for affordable insurance again because we find you the lowest rates that other companies can’t match.

    Oh, and it’s also free. And come on you can’t tell us you don’t want to save up to $500. To find out if you’re losing up to $500 or more a year, just enter your zip code here, answer a few questions and see if you’re overpaying. It takes less than 2 minutes.

    Youre Our First Priorityevery Time

    We believe everyone should be able to make financial decisions with confidence. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free.

    So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.

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    As Debts Get Closer To The Statute Of Limitations Collectors Will Take What They Can Get

    The statute of limitations on debt can be used as a bargaining chip for negotiating a lower settlement amount. As a debt gets closer to that statute, the collector will be willing to take what they can get. So, you can get out of debt for a lower percentage of what you owe as the clock runs out.

    In some cases, you may be able to settle for much less than that 48% average. Collectors holding old debts may be willing to settle for 20% or even less. The statute of limitations clock starts from the date the debt first became delinquent. Make sure to check your records carefully and use the age of a collection account to your advantage during negotiations.

    How To Determine If You Should Negotiate Your Debt

    How to Negotiate Your Credit Card Debt

    If you have credit card debt that you are looking to settle with the credit card company, consider a few factors first. First, explore other options like credit counseling or bankruptcy. Either of those may be a better fit for your specific situation.

    If you are not already several months behind in your payments, the credit card company may not be willing to enter into debt negotiation, so you might need to consider other options. The credit card company will also want to make sure that you have the financial ability to pay any settlement. This could be a lump sum or enough monthly cash flow to fulfill your settlement obligations.

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    If You’re In A Temporary Bind

    Considering that the process of debt settlement is a last resort, first consider credit cards that offer no interest and help you pay off your debt. Most balance transfer cards require applicants to have a good credit score to qualify, but they can help you pay off your principal without worrying about interest charges. Just make sure you pay off your balance before the intro period ends. Some of our favorite zero-interest credit cards that offer balance transfers include the Citi Simplicity® Card, the U.S. Bank Visa® Platinum Card and the Wells Fargo Platinum card.

    Ask If You Qualify For A Relief Program

    In some cases, you may qualify for a specific relief or hardship program. Ask if your creditor offers these programs and if you qualify for them. Come to the call with a specific list of questions.

    Relief and Hardship Program Questions to ask:

    • If I canât make my payment, do you have a financial relief program?
    • Are there fees associated with these programs?
    • If I defer or lower my monthly payments, will interest continue to accrue during this relief period?
    • How long does the relief period last and when will I need to start repaying my bill?
    • What happens if my financial situation hasnât changed once the period ends? Is there an option to reevaluate?
    • What information will be reported to the credit reporting agencies?

    Even if you donât qualify for a relief program, be prepared to ask additional questions:

    • Do I qualify to reduce my interest rate, based on my customer loyalty?
    • Can I defer or reduce my monthly payment?

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