Having trouble keeping up with credit card payments? Wondering if you’ll ever pay your balances?
You may have heard that you can negotiate and resolve your credit card debt. but how does it work? Do you need professional help or can you do it yourself?
Get information on four ways to negotiate and resolve credit card debts.
1. Enter a credit card program for financial difficulties
If your debt problems are attributable to a significant change in the circumstances of your life, you may be able to qualify for a hardness or indulgence reimbursement program.
In addition, “simply being financially overexposed” could classify you as a person with financial difficulties, says Thomas Agree bank, a credit educator at Clearpoint, a nonprofit agency that provides credit counseling.
Entering a difficulty program may give you a lower APR and rate reductions. Agree bank says: “With credit card difficulty programs, you are generally granted a reduced interest rate with a fixed term and payment.” As a result, you can pay less interest. In addition, you may be able to obtain the fee waiver.
To follow this course of action, Homes says he should ask his lender if he has a program to help him with financial difficulties. In addition, you may be able to locate your card issuer’s difficulties department on your card company’s website or on your monthly statement.
2. Negotiate a modified payment plan
The types of programs available to a credit card borrower in trouble may vary based on personal situation and financial institution. If you cannot qualify for an economic difficulty program, you can negotiate a modified payment plan or enter into an agreement with your credit card company.
Such a plan could reduce your monthly payment. A lower monthly payment may allow you to make payments on time without exceeding other areas.
Before making a call, consider reviewing your finances, developing a budget and determining how much you can pay monthly on your card balance. You may be able to prepare to negotiate a lower monthly payment along with possible concessions, such as fee waivers similar to those available through a difficulty program.
Find the phone number to call on your credit card or account statement. Keep in mind that you may need to make several calls before finding a representative or manager who agrees and is authorized to help you.
With a modified payment program, Homes says that sometimes the rate increases “even though the payment has been reduced.” Agree bank says that a delinquent amount can be added to the balance or the repayment period. As a result, although a modified payment can be better combined with your budget, you can pay more in general, depending on how the agreement is structured.
3. Settle debts for less than you owe
With this approach, you offer this lump sum to the card company in exchange for clearing or paying off your debt. Building this balance may involve reserving money in a dedicated savings account for a long period of time; sell items that you no longer need, or use an unexpected gain from an employment bonus, tax refund, inheritance or other source.
To explore the possibility of paying off a debt, you can present your case to your credit card company on your own, or you can hire a debt settlement company to negotiate on your behalf. The FTC offers guidelines for choosing a debt settlement company.
If you work with a debt settlement company, you may be asked to stop making credit card payments and not comply with your debt. This process could allow you to accumulate funds and, at the same time, induce the card company to accept an agreement.
In general, your debt must have been charged as a loss before you can negotiate an agreement with your credit card company. Agree bank says that creditors are not motivated to close a deal if they still receive a minimum monthly payment.
However, non-compliance with credit card debt can cause problems. Failure to make payments could have a negative impact on your credit report, provoke calls from creditors and debt collectors, and result in late fees and fines that increase your indebtedness.
Agree bank says that an exception to get an agreement only after the debt has been canceled can occur “if you can prove to the creditor that you have a high risk of default, but have a lump sum available to settle the debt for less than you owe. ”For example, if you have compensation for dismissal of a recent dismissal, you may be able to reach an agreement without breaching.
4. Enroll in a debt management plan
Credit counseling agencies offer debt management plans (DMP) to help consumers pay credit card balances. With a DMP, you make monthly payments to the counseling organization, which in turn pays your credit card bills. The agency can also negotiate more favorable terms, such as a lower APR, a more manageable payment schedule or fee exemptions with your credit card issuer.
A certified credit counselor should review your financial situation and offer personalized advice on money management before enrolling in a DMP. For example, Agree bank says that Clearpoint first identifies and addresses the reasons for financial difficulties. Counselors can help clients create a family budget, define financial goals and address financial concerns, in addition to developing a DMP to deal with debt.
Consider examining the DMP to make sure you understand and accept its details. You may want to confirm that credit card payments are scheduled according to their due dates to avoid late fees. Agree bank says he can contact the creditors to adjust the due dates if necessary.
The FTC offers guidance to verify the credentials of credit counseling agencies and verify that a DMP can work for you. Also, consider requesting a rate schedule so you know what services you can receive and how much they cost.
Consider getting documentation of any deal in writing. This way, you can confirm your understanding of the agreements.
The disadvantages of negotiating and resolving credit card debt
Having a plan to eliminate credit card debt can be rewarding. But there may be inconveniences to negotiate and settle this debt. They can include:
- Your credit card accounts may be closed. As a result, you will not be able to continue using your cards.
- Your credit score may fall. This fall may result from increased use of credit or other reasons.
- You may owe taxes on forgiven debt.
- You can pay more than originally scheduled. While you can save money on fees and interest, there is also the possibility that you pay more interest over a longer period of time.
- You can incur fee costs for companies that help you with debt management and debt settlement. These expenses could increase your debt burden, rather than eliminating balances.
If you are overwhelmed by a credit card debt, negotiating a new agreement or paying off your balances for less than it should seem attractive. Determine the best course of action by evaluating your finances on your own or by finding qualified counselors who can help you. Understand the benefits and consequences of negotiating or paying off your debt before you begin.