Guide to Debt Negotiation
What is Credit Card Debt Negotiation?
Simply put, when an individual accumulates a high credit card balance and can no longer afford to pay back the debt, the credit card holder can negotiate with the credit card company to cut the interest fees, reduce the principal still owed or cancel the balance of the debt entirely. В There are credit counseling and debt settlement firms that provide help to negotiate a plan with the creditor. Their goal is to enable the debtor to avoid bankruptcy.
When should I try to negotiate my debt?
If you are no longer able to pay down your credit card balance or cannot make the minimum monthly payment, it’s time to consider negotiating with the credit card company. Also, you should take steps to make yourself look favorable from the point of view of the credit card companies. This will give you more negotiating leverage. Pay your minimum monthly payment for the credit cards you can afford for as many months in a row as you can. Also, save up a lump sum of cash if possible that you can offer to the credit card company in exchange for them reducing your debt. You may also want to consider contacting a credit counseling service first before trying to reach a debt settlement. A debt settlement firm is the place to go if you must negotiate. In any case, take action to avoid bankruptcy.
Why are there so many debt settlement companies out there?
With the economy in a downturn, many consumers are out of work and finding it difficult to pay their bills. Furthermore, credit card companies increase interest rates and fees in order to pump up their bottom line. These extra fees are also a big cause for cardholders struggling to pay down their debt. Thus, many debt settlement firms are springing up to offer their services.
According to an article on The Association of Settlement Companies (TASC) Teresa Schumann of U.S.-based debt-settlement firm Prosolvo Data Systems says credit card debt is the fastest-growing area of her business. “We have seen strong growth in the last 24 months,” she says. Card issuers are becoming more open to settling debts, both directly and through debt-settlement firms, as they try to reduce their ratio of charged-off loans, Schumann says. JPMorgan Chase & Co. confirms that when it is directed to do so by its customers, it will enter into negotiations with debt-settlement companies.
Who are the reputable debt negotiation services?
As always, you should be an informed consumer. There are scams out there or firms that take advantage of unaware consumers by charging too much. TASC says that in the past unscrupulous debt-settlement firms tarnished the industry’s image by charging excessive fees and sometimes failing to deliver services. Founded in 2005, the TASC monitors industry participants’ business practices to ensure they are operating within its guidelines. You should consider searching their website for approved members firms.
How can I do it myself?
If you are considering negotiating with the credit card companies then it’s very likely that you would be open to saving some money by trying to reach a settlement on your own. Debt settlement firms can charge in the thousands for their services or take a monthly fee from your bank account. The first step is to call your credit card company and explain your situation. Ask for a settlement and they will most likely request a lump sum payment. Don’t be afraid to negotiate with them. Ask them to take a lower amount if that’s all you can afford. If you are negotiating with a collection agency, ask them to remove the collection mark from your credit report once you’ve settled.
Where can I find more information?
Check these websites for more helpful information.
Wikipedia.org debt settlement article
Uniform Debt-Management Services Act
The Association of Settlement Companies
IRS cancellation of debt article
Transcript on Calling Credit Cards To Reduce Your Rate