Debt Consolidation

How To Settle Credit Card Debt Without Hiring Any Mediator?

There are two ways on how to settle credit card debt – you can either hire a company to negotiate with your creditors on your behalf or you can do it yourself. Debt settlement is a process that allows you to first reduce your total outstanding balance to a low amount and then pay it off in full and final settlement. Depending upon how the negotiation goes on, you may get rid of your credit card debt by paying just 30-40% of the total outstanding balance.

Reasons Why Credit Card Companies May Agree To Accept A Reduced Amount Of Payment

Some of you might be wondering why in the world credit card companies would accept a reduced amount of money in full settlement of the debt. They have their reasons. With the rapidly rising number of people who are getting behind their credit card payments, many companies have suffered heavy losses because of non-payment. As per the laws in the United States of America, if a certain debt remains unpaid for a specific number of years, the creditors must close those accounts by writing off the debts. In extreme situations when credit card companies get convinced that the borrower (debtor) is going through a very difficult financial crisis and if they do not accept a reduced payment to settle credit card debt now, the chances are that they will get nothing (or comparatively much lower amount) when the debtor ends up filing for bankruptcy.

Why You Should Do It On Your Own?

Though you have an option to hire professional mediators to negotiate a settlement deal with your creditors, you may not like to go for it because of two reasons – first, there are very few legitimate companies out there (finding one is very difficult), and second, you are charged a hefty amount of money for such services. Either way can turn out to be a very costly affair for you. That is the reason why it is often better to do it yourself. Your success however will depend on how prepared you are when you approach your creditors and how efficient you are in your negotiation skills.

Get A Clear Picture Of Your Debt Situation

Before you proceed and approach your creditors to settle credit card debt, the first thing you have to do is to gather complete information about how much you owe to which card, what the interest rate is, how much penalty and other charges are due, and how long your accounts have been delinquent. In order to get a better understanding of your debt situation, you are recommended to look into your bank statements, credit report, credit card statement, and the agreement you originally signed up with your credit card companies.

Prepare A Proposal

The next thing you have to do is to look into your financial situation (your regular monthly income and necessary expenses) in order to find out how much you can afford to pay. Now, make a proposal accordingly. Remember, when you contact your creditors to settle credit card debt and tell them about your poor financial situation, they are not going to believe it. They will ask you to show proof. Therefore, a better strategy is to attach relevant documents along with your proposal in proof that whatever you have mentioned is true.

Contact The Credit Card Company

Now you are prepared to talk to your credit card company. Get an appointment scheduled; tell them it is about the repayment of the debts you owe to them. The chances are that they will reject your first proposal; so, be ready for that. When they do that, offer them a second proposal, where you must agree to pay a larger sum of money in full settlement. Since the rejection of the first proposal is very likely, you must offer to pay a very low amount at first. When rejected, offer to make a little higher payment. But, never offer to pay a sum of money that you cannot afford.

What If All Your Proposals Get Rejected?

If all your proposals get rejected, consider accepting the creditor’s offer, but again, that has to be something affordable. If you cannot afford that, tell them that you will have no other option but to file bankruptcy as the next step. Do not threaten them, but tell it in a way that should show that you have really no other option. This strategy always works and your creditors are likely to reconsider your proposal.

One-Time Lump-Sum Payment Vs Payment In Installments

Can you afford to pay a one-time lump-sum payment to settle credit card debt? If not, request your creditors to allow you to pay in monthly installments for a short period of time, such as six months or one year.

Reporting To Credit Bureaus

One last thing that you have to talk about with your creditors is how they are going to report to the three major credit bureaus about your debt payments. If they report as “paid in full”, this will improve your credit score. If they report as “paid in settlement”, it will reduce your score.

The final deal must result in a written agreement, duly signed by both you and your creditors. Always remember, verbal deals have no legal value. Overall, if you follow the above steps thoroughly, you can settle credit card debt on your own without hiring any debt settlement company. I wont say doing it on your own is an easy process, but it is not impossible. If you approach it the right way, you will definitely succeed.

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Posted in Credit Card Debt Consolidation, Debt Consolidation | 3 Comments »

3 Responses to “How To Settle Credit Card Debt Without Hiring Any Mediator?”

  1. [...] This post was mentioned on Twitter by Rajesh Anand, Eli. Eli said: How To Settle Credit Card Debt Without Hiring Any Mediator? [...]

  2. Alice says:

    Very wonderful tips are depicted in this article to come out of this credit card debt. First of all never take that much amount that you cannot pay because it leads to late payment which increases the penalty i.e the amount is increased actual amount + penalty. If the credit card payment is too high that you can’t afford to pay off its better to negotiate with a the credit card company . In this option its better to choose a do it yourself plan because its your situation and you know it better. So why to give unnecessarily fees to a mediator. First of all work out on the entire outstanding amount that you have to pay and prepare a proposal for payment. The reason for agreement of Credit Card Company is if you don’t pay the amount the complete balance is a sheer loss to the company. So it’s better to collect to collect the amount and reduce the loss. The possibility is the credit card company will reduce the amount and pay the lump sum amount as this will increase your credit score. If it is not possible go for monthly installment option. Very useful article.

  3. Peter says:

    Plastic money has become the necessity of today’s world. It is very rare to find any individual without using plastic money such as Credit Cards, Debit Cards. Credit Card debts have also become very common. It seems very easy to do the payments by Credit Card but doing the repayment in full does not seems to be same. Now a day, the debt settlement programs have become very popular. If you find yourself unable to pay the debt, you can go for the settlement process with your creditors and consolidate the whole unpaid amount into one time payment or you can choose the installment option. The first step is to prepare your self with all the data, proofs of income which can resemble your financial condition. Now you have to develop your all negotiation skill to convince the company for a better deal. The company will be ready for the settlement if you can make them convinced about your poor condition. Once they become ready you can request them to give the permission of paying the consolidated amount in installment. Last but not the least every deal must be in writing and sign the agreement only after reading it thoroughly.

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