How To Negotiate When You’re Having Financial Problems
While credit card companies encourage you to call them if you anticipate having problems repaying your debt, some are more amenable to working with you than others, and it’s almost impossible to guess how they will react until after you call. With most companies, you should call if you know your payment will be late by a few days, or if you think a change in the regular payment datesuch as moving it from the first of the month to the middle of the monthwill make it easier for you to pay on time. Many companies may also provide you with relief if you are temporarily out of work or if a sudden illness or family emergency arises that you need to tend to.
Getting Help With Your Credit Card Payments During the Coronavirus Crisis
Many credit card issuers have announced different kinds of assistance for consumers during the COVID-19 outbreak. Available help includes credit line increases, collection forbearance, and skipped payments.
Other companies might cut off your credit if you provide any hint that you could have trouble making the payments. So, you need to be careful when you decide to negotiate, who you choose to negotiate with, and how much you tell them about your financial woes. If you do call, be prepared to respond to the credit card company’s concerns. Finally, don’t let a bad experience with one creditor discourage youothers might take a different approach.
Negotiating With Third Party Collection Agencies If Your Account Is Not Charged Off
There are circumstances where your creditor will send your account out to a third-party debt collector before they charge off the account. American Express is the best example of a creditor who does this. Nothing much is going to change in your approach to negotiating an account that gets sent out for collections early, but that is still less than 180 days delinquent. There are a couple of subtle things to be aware of when negotiating with contingency debt collectors.
The next stop in our guide is not so much a how-to as a need to know. When wanting to settle debt after charge off, its important to know what to expect from your lenders, in terms of their policies, current trends, and collection practices.
Next is learning how the top 7 banks handle debt settlement, and setting realistic goals for your negotiations.
If you have questions and concerns about settling your debts at this stage of collection, and moving forward, post in the comments below for feedback. If you would like to talk over your situation with me you can reach me at 800-939-8357, choose option 2. You can also submit the talk to Michael form in the sidebar.
This Debt Settlement Guide includes:
Where Can I Find A Trusted Debt Settlement Firm
With the huge rise in unemployment, unmanageable debt, economic problems, and uncertainty in the marketplace, many fly-by-night companies have sprouted up offering debt settlement to consumers that are not legitimate in fact many are nothing more than scams. Some offer unrealistic settlement expectations or promise nearly impossible monthly payments and time horizons. They are simply doing this to make a quick buck at your expense!
A good debt settlement firm always trains its agents to help you understand what your options are and is very realistic with you about what to expect. Often, companies simply looking to scam you look to collect fees up front regardless of whether they stand behind their promises.
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Find The Right Debt Settlement Company
There are dozens of debt settlement companies out there. Do some research and set up several consultations to ensure you choose a company thats reputable, trustworthy and affordable.
Find out up front how much its going to cost, how long its going to take and what the risks are. The company should be transparent and give you this information. If they dont, beware: they could be scammers.
Debt Management Program Or Debt Repayment Plan
Consolidated Payment with Low or No Interest
A Debt Management Program is when you get help from a credit counselling organization to consolidate your unsecured debts into one manageable payment. Some people also call it a debt repayment plan. This type of consolidation works with your budget so that you dont have to borrow more money to try to get yourself out of debt.
As part of this program, a credit counsellor works with you to help you establish a realistic budget. Based on your budget, they help you figure out a realistic monthly payment that you can afford to pay on your debts.
With your permission, the credit counselling agency then approaches all your creditors and negotiates for all your debts to be included on the DMP at a payment you can afford and with all the interest rates either eliminated or substantially reduced. All of your debts are then paid off within 5 years .
To find out if a DMP is right for your situation, you can make a free appointment to speak with one of our certified credit counsellors. They will put together a budget for you, assess your financial situation, and see if a DMP would be the right fit.
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Make An Agreement & Pay Off Debt
Ask for a written agreement before you do anything. Read it over carefully and understand payments, due dates and penalties before you sign it.
Be patient. Collection agencies are good at intimidation. They rush debtors into a process with subtle, and sometimes not-so-subtle, threats about the consequences for not paying. Play the negotiating game at a slow pace. Make them explain everything to you in detail. If you drag the process out long enough, they may improve their offer to get something out of you. Patience definitely pays off.
After you have negotiated the agreed upon price, you will need to pay the settlement figure either in a lump sum or with a payment plan. Once you have done that, you are no longer in debt to the creditor.
Settling Your Debt On Your Own: Tips And Precautions
As a financial counselor, I am often asked about the best way to deal with debt. A few common questions include, Can I just settle on my debt? and Should I hire a company to fight for me to get the best settlement? In this blog, I will address those and other questions, using material from a recent blog post by Bruce McClary from the National Foundation for Credit Counseling® entitled, How to Negotiate Debt Settlement on Your Own and the Impact to Your Credit Score.
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Should You Do It Yourself
If you decide that a debt settlement is the right move, the next step is to choose between doing it yourself or hiring a professional debt negotiator. Keep in mind that your credit card company is obligated to deal with you and that a debt professional may not be able to negotiate a better deal than you can. Furthermore, the debt settlement industry has its fair share of con artists, ripoffs, and scams, which is why many people choose to try it on their own first.
Debt settlement can adversely impact your credit score, making it more difficult to borrow money at affordable interest rates in the future.
Schedule Your Free Debt Analysis
Potential clients speak with a certified debt specialist regarding their financial situation.
The debt specialist evaluates the callers financial situation and suggests the optimal debt relief strategy.
Clients choosing to enroll in our debt relief program are then guided through the enrollment process.
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Get An Agency To Negotiate Debt Relief For You
When your credit card debt has gotten to a point where you cant keep up with your minimum payments, its time to get help. The sooner you get help, the more options youll have. Regardless of which option is right for you, its important to seek credit card debt assistance from a reputable agency. Any agency will still have to work with your creditors, so the sooner you get them on board, the more likely it will be that they can find the least painful solution for you.
Below is an overview of the types of debt help you can get from different agencies .
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How Resolve Can Help
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What Are Your Fees
Some of Debmericas programs are performance based, which means that our clients do not pay any fees until settlements have been negotiated on their accounts. However, if you are enrolled in one of Debtmerica, LLCs attorney-based debt settlement programs, then Debtmerica, LLC may receive fees prior to any settlement being obtained with a creditor. The total fees for our programs range from 20% to 24% of the enrolled debt balances that are settled. Upon each account being settled, a fee will be assessed specific to that settlement and collected from the special purpose account set up specifically to facilitate the debt settlement process.
Check The Statute Of Limitations
Before you attempt to settle a debt, check the statute of limitations on the debt. Collectors only have a certain amount of time to sue you for payments. If your debt is too old, the collector can’t take you to court. You can determine if the statute of limitations for collecting a debt in your state has passed.
If you find the debt is older than the statute of limitations, tell any bill collector calling you they are wasting their time by harassing you for an uncollectable debt, as neither they nor the original creditor nor the assigned collection agency can take you to court to get a judgment.
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Now Youre Ready To Call Your Credit Card Companies To Negotiate
Now youre armed with all the information you need to make an effective case. Have all this information written out and on hand when you start contacting your credit card companies. Then take these steps:
If a credit card company is still unwilling to budge, then it may be time to consider some alternative relief options.
How Much Will Creditors Settle For
This depends on many factors including how big the debt is, how old it is and how far in default you might be. Creditors will accept a settlement that involves less than you owe if they think they have no option. If your account is in good standing, and you have no late payments, you are less likely to be able to negotiate a reduction directly with your creditor. You may, however, be able to negotiate an interest rate reduction which can help you repay your debt sooner.
A word of caution: we never recommend that you stop paying your debts when negotiating with creditors. If youve recently stopped making payments, your creditor will not likely be in a mood to accept a settlement offer early.
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Assess Your Current Financial Situation
Lay out a plan on how to tackle your financial situation. Find out who you owe, how far behind are you on the payments, and how much money you have to negotiate with. Sometimes it is better to continue on-time payments while building a large enough sum to complete the process of debt settlement.
If you are delinquent on your payments, create a separate bank account where you can set aside money to pay a one-time lump sum to your creditor or a shortened payment plan. When negotiating, you need to come to the table with at least 50% of what you owe for the creditor to seriously consider offering a debt settlement.
Can A Debt Collector Take You To Court
I read a story recently where a creditor took a woman to court about credit card debt that she had incurred in 2006. It was in her name alone and not in her husbands name. The debt collector wanted $1,500 plus costs from a woman who was living on disability and Social Security, plus a small pension.
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Enroll In A Hardship Plan
If youve already missed payments on a bank credit card, that bank may have already reached out to you about reducing your monthly payments by enrolling you in a hardship plan. While not widely advertised, these programs lower your interest rate. They may also waive or eliminate fees and penalties. Also called assistance programs, hardship plans can be short-term or long term. On a long-term hardship payment plan , your account is canceled and your interest rate is frozen while you repay your debt.
What qualifies for a hardship plan? While hardship plans are generally negotiated on a case by case basis, usually a major life event that impacts your ability to pay will qualify you. Examples include unemployment, a serious illness, divorce or a natural disaster such as a fire, hurricane or flood.
Note that not all credit card issuers offer hardship plans. And even if they do, not all will provide specific information about their plans without talking to them directly. Discover seems to be the exception, offering information about its hardship programs on its website. If you want to see what kind of help you can get from your bank, call the number on the back of your card and ask a representative if they offer hardship plans. If they do, explain your situation honestly and tell them you want to pay what you owe but that youre struggling right now.
How Long Does A Debt Settlement Program Last
Debt settlement programs assume an effort that will continue for many months. The time needed to produce a settlement depends on a number of factors. These may include: your financial hardship, the age and balance of the accounts that you owe your creditors, c) the funds you have available to pay for a settlement and the willingness of individual creditors to enter into debt settlement negotiations. While no guarantees can be given, generally the quicker you save money the sooner you will be in a position to reach your goals. Increased savings will provide you with the option to accept lesser discounts and will also enable you to accumulate funds to reach your debt settlement goals more quickly. However, any settlement must be acceptable to both you and your settling creditor.
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How To Settle Credit Card Debt On Your Own
If you have a significant amount of credit card debt and are wondering how you will ever dig out from under it, this article is for you.
There are ways to legally settle credit card debt that involve everything from manageable payment plans to interest forgiveness to flat out not paying all or part of what you owe based on specific legal statutes.
Understanding Your Debt Payoff Options
While it’s best to pay off debt that’s in collections rather than settling it, both options are far more beneficial than ignoring the debt completely. You should give yourself credit for reaching the point at which you’re ready to face your debt and get rid of it. While it may take time and effort, the promise of being debt-free is a meaningful, and realistic, goal to pursue.
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Your Credit Will Be Damaged For Seven Years
When you negotiate with a creditor to accept less than what is owed, the creditor will generally report your account as settled for less than the full balance. This mark typically remains on your credit report for seven years from the date of settlement, unless you already had late payments on your account that were never brought current. Delinquent accounts can hurt your credit rating more than any other action on your report, excluding bankruptcy, foreclosure, and accounts closed for non-payment.
A settlement reported to your credit can lead to a drop of as much as 10% in your score, depending upon your current rating and past credit behavior.