Do-It-Yourself Process for Credit Card Debt Negotiation
Getting out of credit card debt is a difficult and time-consuming process. It can be overwhelming, especially if you have a large amount of credit card debt or if you have fallen behind on the payments. Some people may consider going to a credit counseling service to negotiate down the amount that they owe, but you can do this yourself and save money. Most credit card companies are not willing to negotiate until you are behind on your payments, but they may be willing to lower interest rates or make other concessions.
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Instructions
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List all of your credit cards, the amount you owe on each, and the interest rate on each. Look at your credit report to make sure you have not forgotten any debts.
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Mark the credit cards on which you are behind on payments, and the amount you owe on them. These are the debts you will try to settle through negotiation. Next to each of those cards, write down half of the amount you owe on them. Half the debt is the lowest settlement you can expect to achieve by negotiation.
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Call the credit card companies you are current with and ask them to lower your interest rates. If they refuse, try again in a few days, or open a credit card with a lower interest rate, transfer your balance over, and close the original credit card. Some companies will lower your rate if you freeze the card, meaning you will not make any more purchases on it. Also ask them to forgive late fees and other penalties.
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Save up money to pay off your delinquent cards one at a time. When you have enough money saved to pay off half the balance on a card, call the company and offer to settle the debt. Start by offering less than what you have saved.
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Negotiate the amount you owe to the credit card company. If they will not agree to what you can offer, move on to another credit card. Try the first company again in a few months. If the credit card company agrees to the settlement, request a letter stating that the agreed payment amount will be considered to be settlement in full on the debt.
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Send the money only after you have received the letter. Keep a copy of the letter and a receipt of the certified check you used to make the payment.
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Continue this process until you have paid off all your credit cards.
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Tips & Warnings
Create a budget to find extra money to put toward your debt.
Set up a debt-elimination plan for the debts that are current, so you can get entirely out of debt.
Work on settling just one credit card debt at a time. Contacting a company often makes the collection calls begin again.
You will need to pay taxes on any forgiven debt. Be sure to set money aside to pay those taxes at the end of the year.
You should not attempt to negotiate your debt if you are current on your debt payments. Negotiating to pay less leaves a serious mark on your credit report, although it looks better than having a delinquent account that has not been paid. Do not stop paying on your debts so you can negotiate to reduce the amount you pay. It is better to stay current in your payments, set up a budget, and work through a debt-elimination plan to get out of debt.
Many debt negotiation and credit counseling services do a poor job of helping clients. Be sure to check with your Better Business Bureau about complaints against the company before you consider doing business with one.
References
- Photo Credit credit cards image by Aleksandr Lobanov from Fotolia.com
