Advertiser Disclosure

Definitive Guide to Credit Card Debt Settlement.

Credit card debt settlement

If you’ve maxed out your credit cards and are getting deeper in debt, chances are you’re thinking about how you’ll ever get to pay down all the debt. In this case, you may want to consider negotiating with your creditor to reach a credit card debt settlement agreement.

So in this content piece, we will discuss the ways on how you can negotiate and settle your credit card debt with your bank. 

Come Up with an Agreement

The credit card company may also be willing to lower your interest rate, remove late fees, or reduce the minimum monthly payment in an agreed-upon plan.

Since credit card companies cannot come after the assets of the person who failed to pay what they owe, these companies may settle for a negotiated amount that ranges from 40-60 percent of the balance owed.

How soon can you be debt free?

The percentage of debt typically accepted in a settlement may fluctuate due to several factors, including the age of the debt, financial situation of the debtor, cash on hand, and the creditor in question. 

When you negotiate your debt, make sure to get it in writing from the company and keep a list of whom you speak to in order to ensure you have a binding agreement, no matter who may leave the company after that negotiation.

It is also important to note that by having a written agreement, you are holding both parties accountable, which means you also have to honor the agreement. 

Settling with Behind or Default Debt

If you’re critically behind on your debt payments and spiraling toward bankruptcy, you may negotiate with your credit card company and they may agree to take what it can get, giving you one last chance to get back on track.

In other cases, companies may advise you to default on your credit card payments and instead pay the money to them and report the default on the credit bureaus.

If you don’t want to file bankruptcy or don’t qualify for one, considering a debt management plan may be the most appropriate choice for you to trim more of your debt. 

Full Amount Payment

Credit card debt settlement programs are usually paid in lump sum amount that asks the debtor to set aside a specific amount of money every month into an escrow-like account to accumulate enough savings to eventually pay off a settlement.

Nonetheless, it is always better to pay your debt off in full to improve your credit score and to show potential lenders that you have paid the creditor the full amount that was due. 

You may want to gather as much cash as you can, whether this means selling personal assets, borrowing money from family members, or taking a part-time job, in order to make a lump-sum payment.

However, if paying the debt in the full amount is not an option, settling the account is considerably more advantageous than letting it go delinquent or default. 

Negative Effects on Credit Score

If you don’t repay the full amount owed, it will have a negative effect on your credit report for seven years from the date it was settled. In fact, succeeding in getting a settlement or skipping payments can hurt your overall credit score almost as much as a bankruptcy.

This will, in turn, affect your future credit availability, loan terms, employment opportunities, and more since the settlement will be reported by the creditor to each of the three leading credit bureaus. 

In Conclusion

Facing past due debts can be overwhelming, and you may feel like doing anything to resolve the situation. Furthermore, not settling your debt may lead to worse scenarios, such as continued late payments, credit-agency collection attempts, and going into default which will end up hurting your score more in the long run.

So if you need help with your credit card debt settlement, it can be a good idea to find a qualified partner to help. 

In line with this, our company can help you find a solution that fits you by assessing your total financial picture to make recommendations accordingly depending on your current financial situation.