Negotiate credit card settlement, how to settle credit card debt on your own and for less than you owe : Bad Credit Advisor

Negotiate credit card settlement, how to settle credit card debt on your own and for less than you owe

Reader experience update: I tried to negotiate what I thought was a fair credit card settlement with Discover. I have been a card holder for more than 6 year. I lost my manager position in the bank closed by Fed in the North East. I was negotiating in vain, trying to cut my $6,300 balance to around $3,500 with 6% interest to no avail for 2 months. Finally, I got tired of being nice and explained them in writing that with my unemployment checks as only source of income, I am perfectly fit to file for bankruptcy, Discover relented. I settled my entire debt for $2,800 lump sum.

You can negotiate credit card settlement with literally any lender and settle for a lot less that you owe. Does not matter which bank or credit card issuer you are dealing with, Chase, Bank of America, Capital One, American Express or some no-name collection agency that drives you crazy - you need to engage them, negotiate and settle. Conduct debt negotiation on your own. If you get someone else involved as go-between, your credit card settlement will be more costly and you also end up paying high fees. It is very unlikely that any intermediary you hire would have your best interests in heart. First and foremost, they would worry about their cut. You may even get into much worst financial shape than before. So how to settle credit card debt on your own and for less than you owe? Debt negotiation and subsequent settlement require persistence and thick skin. Dealing with banks or card issuers like Bank of America or Capital One is generally a bit easier than with any collection agency, simply because the former behave in a more civil manner and do not use cheap threats and rude loud language. Still to negotiate credit card settlement with them will certainly require guts and determination.

How to settle credit card debt - where to start
To negotiate a successful credit card settlement for less than you owe, you obviously have to somehow force lenders start negotiating and make them want to settle with you. Depending on your situation, you should choose one or the other - stop making credit card payments to demonstrate your inability to pay or to softly ask them for some sort of debt relief without actually stopping payments but firmly implying that you will if no agreeable settlement is coming. Interesting that for vast number of borrowers it is easier to simply jump the gun and stop paying, than to make that first phone call and politely ask before stopping.

If you are seriously struggling and/or could care less about your credit history and scores for quite sometime in a future, then you should probably stop paying and then try to settle for a lot less than you owe. If however, you still want to have some resemblance of the good credit after you are done and have money to pay some of your debt, it is prudent to call, state your hardship a offer a credit card settlement. You can always stop your payments later if being nice does not produce a desired outcome, and start more serious debt negotiation.

Know what to negotiate
Often, if only few certain things like late or over-the-limit fees, balance transfer fees, sky-high interest rates go away, you may just make it. Some issuers and banks will be more willing to negotiate those unpleasant items than others. Ask your credit card issuer if that is something they would do. Again American Express may be easier on late fees while Bank of America and Chase may lower your interest by one or two percentage points.

If your annual interest rate is higher than 12%, request a lower rate. Do it while you are still making payments on time. When you negotiating such a credit card settlement, always ask to lower your current rate by 5% or 6%. You may settle for 2% or 3% cut in the end. Always be ready to back up your request by a not so veiled threat of looming delinquency if bank does not want to negotiate or its counteroffer is not good enough. Yet be reasonable.

Settling credit card debt - dealing with threats
At some point, you will likely be threatened to be referred to a collection agency and even by a lawsuit, wage garnishment and all those nasty things that every US consumer has been having nightmares lately. You need to be calm and steady, and politely let your creditor know that frankly, if this is how they want to negotiate credit card settlement when you are seriously trying to do it in good faith, then you simply do not care. Tell them that Chapter 7 Bankruptcy is always an option and besides, filing a lawsuit against you is not worth their time and money.

Negotiate credit card settlement - making an offer
When making an initial debt settlement offer, you can be as unreasonable as you want. Again, if you have not missed a payment or missed just one or two and by no more than 30 days, you can try to set up an affordable payment plan. But if you miss several monthly payments and already have 60- or 90-day Lates on your credit report, offer them as little as 5 cents on a dollar. Basically set a ceiling you do not want to go over and stick to it. Chances are your credit card lender will accept it, eventually.

Should you offer to pay a lump sum settlement of, let say, 25% to 40% of the outstanding debt balance? I would rather have settle for some monthly payment plan and here are two reasons why. By offering to pay a lump sum, even substantially smaller than you owe, indicates that you have money. Depending on how much your offer is, the creditor may be tempted to go after your savings. If you offer a monthly payment plan, the danger of such a knee jerk reaction becomes much less. The second reason is quite simple, you may need your cash for something else.

Negotiate credit card settlement - a few odds and ends
Once you settle credit card debt on your own and for less than you owe, hopefully for a lot less, get everything in writing. When negotiating, do not rush into agreement if your credit history already is a mess. If you qualify, the Chapter 7 Bankruptcy is still there, and while your are procrastinating, your credit cars debt gets older and harder to collect, and the creditors have more reasons to simply charge it off.

Before sending your lump payment by certified mail with return receipt, request a conditional debt satisfaction letter, stating that the entire credit card debt will be wiped out clean when the creditor gets whatever the sum you settle for. Such a letter will bullet prove any subsequent problems that may arise if you creditor decides to sell the remaining balance to a collection agency or a few. And know your state statutes, for both debt and judgement.

Tue Feb 9, 2010 08:02AM by Tony | More in Debt Relief | Comments (0)

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