Friday, November 25, 2022

How Much Can I Settle My Credit Card Debt For

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How To Stay Away From Such Situations

I Can’t Pay My Credit Card Bills

Follow these instructions to keep away from landing into such situations that may ask you to opt for credit card settlements-

  • Sign up for the auto-pay feature on your credit cards mobile application/online portal
  • Set up timely reminders for your due dates
  • Pay before time- Do not wait until the last minute to pay your credit card overdue
  • If you are really short of finances, then pay at least the minimum amount due before the last date. The remaining balance can be paid in the interest-free period
  • You may take a personal loan if you have reached a stage where paying your credit card dues does not seem possible to you as these loans have lower interest rates
  • You can request your bank to convert your outstanding balance into easy, affordable EMIs, which you can pay over a specified period of time
  • As an alternate, you may also transfer your credit card balance to another banks account and pay the sum through regular EMIs

To Conclude:

All in all, it is best to avoid landing in such a situation where you have even the slightest chance of not being able to repay your credit card bills. It is better to keep yourself away from landing in such situations than to suffer later. Try to make minimum use of your credit card. Even if you use it quite often, ensure that your monthly credit card bill does not exceed your monthly income. Ensure that you spend only on what you can actually afford and keep clearing your bills well in time to maintain a good financial health.

Let Clearone Help You Settle Credit Card Debt

  • ClearOne Advantage does not charge you upfront fees and offers personalized plans to suit your needs.
  • Our Certified Debt Specialists make sure that you understand all the details of your debt settlement plan before you commit.
  • We give you access to an online portal through which you can track your debt settlement progress in real time.
  • Our expert negotiators have years of experience working out the best settlement deals for our clients.
  • Our Client Relations Specialists support you throughout the debt settlement process to keep your efforts on track.

How Debt Settlement Affects Your Credit Score

Credit scores are generated by the information found in your credit report. When the credit reporting bureaus review your credit report, an account with an account condition of “Settled” may be seen as a negative. A settled account may be seen as proof that you were unable to pay your balance in full. New lenders may look into your full credit report to understand how likely you are to repay any balance they lend to you, so a “Settled” account shows that you were unable to completely repay a balance in the past.

For this reason, while a debt settlement can reduce what you owe and prevent you from using the credit card , you should expect to see a credit score drop when a debt settlement is officially made. This record of your debt settlement will remain on your credit report for seven years, which can also affect your ability to be approved for loans or new credit lines, and could even be seen as a negative when you apply for a rental home.

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Option : Try A Debt Management Program Instead

Depending on your amount of debt, a debt management program may be a better choice for your financial situation. Debt management programs help you make a budget and pay off your debt in full. This differs from a settlement, which means you are paying less than you owe. With debt management, you repay the balance you owe in full, but reduce or eliminate interest charges. Since you repay the principal in full, you can avoid the credit damage caused by settlement.

Debt Settlement Is A Service Offered By Third

How to Afford Paying Off Credit Card Debt

Although it may be tempting to use a debt settlement service to reduce your debt, its important to keep in mind that you could end up deeper in debt or with a negative impact to your credit.

Heres some key information you should know about how debt settlement works, its pros and cons, and how it could affect your credit.

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How Does Credit Card Debt Relief Work

  • Debt consolidation brings your credit card debt under the roof of a single loan. This loan will preferably feature a lower interest rate than what you are currently paying to your creditors.
  • combines your debts into a single bundle, lowering the cost of your credit. It instills some much-needed discipline in your finances.
  • Bankruptcy may be a solution if you are buckling under the burden of your credit card debt. This credit card relief method uses a legal avenue that allows you to discharge some of your debts while paying off the rest in a structured, disciplined way.
  • Debt settlement is a form of credit card relief in which you work with your creditors toward a realistic debt reduction plan. In most cases, it is best to do this with the help of a debt settlement company that uses professionals to negotiate with your creditors on your behalf. Through debt settlement, your creditors may forgive a portion of your principal debt so you end up paying less than you owe. Contact ClearOne Advantage to learn more about how debt settlement works.

Debt Settlement Vs Bankruptcy

When the process works as intended, debt settlement can benefit everyone involved. Consumers get out of debt and save money, debt settlement firms earn money for providing a valuable service, and creditors receive more than they would if the consumer stopped paying altogether or entered chapter 7 bankruptcy. Chapter 7 bankruptcy involves liquidating the debtors non-exempt assets and using the proceeds to repay creditors. Exempt assets vary by state but often include household and personal possessions, a certain amount of home equity, retirement accounts, and a vehicle.

Compared to debt settlement, Detweiler says, if a consumer is eligible for chapter 7 bankruptcy, it may be a faster option. It is a legal process that can stop collection calls and lawsuits. Debt settlement doesn’t offer those guarantees. Still, he adds, there may be a variety of reasons why chapter 7 may not be a good option. A consumer may have to surrender property they may feel they need to keep. Or they may not want their financial troubles to be a matter of public record. Consumers could also find their employment options limited if they declare bankruptcy, as some professions evaluate workers credit histories.

Chapter 7 bankruptcy can be over and done after three to six months, versus years for debt settlement. It can be less stressful and may allow your credit score to recover faster, though bankruptcy will remain on your credit report for 10 years.

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Verify The Debt First

If you get contacted about a debt, always ask the person on the other end of the phone to verify the debt. They should be able to provide:

  • The full name of the person on the account .
  • The name of the original creditor, if its a collection account.
  • A summary of the full amount you owe.

If they cannot provide this information, or the information they provide does not match your records, dispute the debt. Ask for the agencys name, the name of the representative that youre speaking with, and a contact call-back number. Then ask that they send you a written notice about the debt immediately.

Once you receive this notice, you have 30 days to dispute the debt in writing. You should send the letter to the collection agency by certified mail return, receipt requested. This will ensure you know exactly when they received your dispute letter.

How Debt Settlement Impacts Your Credit

I Have $70,000 in Credit Card Debt!

Its important to know that your credit scores have already declined if youre at the point of resolving your credit card debt or other debt. Although this can be stressful, your top priority should be to get out of debt and get your finances back on track.

Talk to your credit card company about whether it will report your agreement as a settlement to the credit bureaus. If so, that settlement could appear on your credit report for about seven years and may damage your credit score. Ask your credit card company to report the settlement as paid in full instead. Once your debts are settled and wiped away and you are keeping your financial house in order, your credit scores will move up.

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If Your Monthly Credit Card Payment Rivals Your Mortgage Or Rent Or If High Interest Rates Are Making It Impossible For You To Get Rid Of The Debt It Might Be Time To Negotiate With Your Credit Card Company

On average, people hold around $3,100 in credit card debt, according to a 2019 Credit Karma analysis. And with a median household income of $61,937, according to 2018 Census Bureau data, most Americans likely use a substantial portion of their earnings to pay down consumer debt.

But when this debt becomes an unbearable financial burden, what can you do? One option may be to try to negotiate with your credit card company.

Credit card companies are about collecting the money. Theyre going to size this up and if they say, This is a person who sounds like a good risk and is likely to eventually repay this bill, then theyre likely to make concessions, says Mike Sullivan, a personal finance consultant with Take Charge America, a national nonprofit credit counseling agency.

If youre drowning in credit card debt, it may take a phone call to your credit card company to devise a workable solution. Dont know where to start? Heres a guide for how to negotiate with your credit card company.

Offer A Lump Sum Settlement

If you have access to a good amount of cash, or can put it together fairly quickly, you can try to negotiate a settlement with the credit card company in three payments or less . Sometimes your credit card issuer will reduce your debt to the principal you owe. For example, lets say you have a credit limit of $9,000, but with interest, fees and penalties, your current balance is $12,000. You may be able to negotiate so that you pay just three installments of $3,000. The other $3,000 you owe will be forgiven.

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Why Should You Never Pay A Collection Agency

Debt collection agencies are highly unlikely to settle towards a partial payment as their interest lies in recovering the entire amount. They possess the resources and the means to drag you into a lengthy court proceeding and are likely to undertake heavy-handed intimidation tactics.

It is crucial to avoid engaging with a debt collection agency and, instead, contact your credit card company or lender directly to work on a flexible payment plan. This process will not be easy, but it is the ideal course of action. Focus on working out a settlement that is favorable for both you and the lender.

How To Go For Credit Card Settlement The Process

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You can initiate credit card settlement by following these steps-

  • Visit a debt settlement agency or reach out to your credit card issuer
  • Briefly explain your inability to repay your credit card bills in a credit card settlement letter
  • Also, mention that you are open to negotiating with other repayment terms in your letter
  • Next, you may offer a lump sum payment to your credit card issuer or else, file for bankruptcy
  • Your issuer may either accept or deny your credit card settlement. If at all, it gets approved, you may be offered a repayment plan on the basis of your current income

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You Wont Have To Pay Any Fees Until Your Debts Are Settled

In 2010, the Federal Trade Commission enacted the advance fee ban on debt settlement companies. The rule prohibits any debt relief company from charging fees before settling or reducing a customers credit card or other unsecured debt.

This means a debt settlement company cant charge you any fees until theyve officially settled at least one of your debts. So, you shouldnt be required to pay any setup or monthly administration fees on a debt settlement program. If you do, then the company must offer a money-back guarantee. If they dont, its a sure sign of a debt settlement scam.

Is Debt Settlement A Better Choice Than Bankruptcy

Bankruptcy may allow you to eliminate most of your debts quickly and this is typically referred to as a Chapter 7 Bankruptcy. In other cases, you may be required to pay back a percentage of your debts over time. This is typically referred to as a Chapter 13 Bankruptcy. Bankruptcy also offers legal protection under the court so that you dont have to worry about being sued or harassed by creditors while completing the bankruptcy process. While most reputable debt settlement firms will work to assist in minimizing calls and harassment where possible, debt settlement does not provide the guaranteed legal protection that bankruptcy does.

Chapter 7 bankruptcy is not an option for everyone and it has gone through some changes since the bankruptcy reforms of 2005. Unlike the not so distant past, it has become more difficult to qualify for full liquidation of your unsecured debts. Chapter 13 bankruptcy requires five years of court-ordered payments to a trustee, and may require you to surrender some of your assets.

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Debt Settlement Vs Minimum Monthly Payments

Making minimum monthly payments on high-interest debt is not a good option for consumers who want to save money. It can take yearsdecades, evendepending on how much debt you have and what the interest rate is. Interest compounds every day on your entire balance, and with minimum payments, you make little progress paying your balance down each month.

Consistently making minimum monthly payments and forking over tons of interest might make you highly profitable to your creditors, and, yes, solid payment history is good for your credit score. However, we dont recommend spending more than you have to on interest to boost your credit score. A good credit score wont pay for your retirement money in the bank will.

Further, if the amount of available credit youve used is high relative to your credit line, that will hurt your credit score and potentially negate the effect of your consistent, timely payments. The AFCC report cites that “the average client reduced their total debt at the time of settlement of approximately $30,000 to $35,000 by roughly $9,500 after deducting fees.

Consumer who consistently make just the minimum monthly payment on high interest credit card debt can end in paying more in interest than the principal.

How Debt Settlement Companies Charge

My $42,999.92 Credit Card Debt

Debt settlement companies typically charge in one of two ways. The first is to charge you a percentage of your total debt, which is usually in the 13-20% range. Say the company you choose charges 20%.

If you owe credit card companies a total of $100,000 you would then owe the debt settlement company an additional $20,000. Another way they charge is by billing you a percentage of your negotiated debt. Since that amount should be less, the percentage charged will likely be higher, sometimes as much as 35%.

In that case, if your $100,000 credit card debt is negotiated down to $50,000 then youll end up owing the debt settlement company $17,500.

Some debt settlement companies might also charge monthly fees while youre in the program. These are hefty sums in either situation so its important to really weigh how successful youd be if you enrolled in this type of program.

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Factor : What Is Your Payment History

In order to settle for substantially less than you owe, you must be behind on most of your unsecured debts over $500. Otherwise, the creditor will see that you are paying off loans at 100% plus interest and may not be willing to settle.

Once you enroll with Pacific Debt, Inc as a client, you will be making the decision to stop paying on all your unsecured debts, if you are not behind already. This will likely result in a decreased credit score, but if you are looking at debt settlement, your credit score is probably already negatively affected. Your credit score may improve as your program progresses assuming you maintain payments on debts outside the program such as secured debts. Since each consumer’s situation is unique, no debt settlement company can accurately predict how high or low your credit score is likely to climb or fall.

Protect Your Credit Reports

Settling your debt can majorly affect your credit. The ways that your settled debt shows up on your credit report have drastically different effects on how future lenders see you, and your credit scores will also be affected. If you dont ensure that your settled debt is reported to the credit bureaus in a certain way, then it can seriously hurt your credit scores. Ask your lenders to report your settled debt as paid as agreed. This is still a negative item on your report, but its not as harmful as default or charge-off.

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