A large number of people across the globe face a menace called credit card debt. Do you find yourself in a similar situation? An intelligent credit card debt negotiation might do the trick for you. Read on to ensure that you have the right ideas before entering a credit card debt negotiation.
Question: Does credit card debt negotiation mean getting rid of a portion of the debt?
Answer: Not really, provided you are not opting for credit card settlement. With credit card debt negotiation you are seeking assistance of your current credit card providers in clearing off your debt. You should basically try to lower the annual percentage rate (APR- interest rate for a whole year) by using your negotiation skills. Do not forget to include credit limits and other benefits within the deal. Try not accept the first offer which is often the worst one.
Question: Why would the credit card company agree to a lower APR?
Answer: There is fierce competition within the credit card industry. Market compulsions do not leave your creditors with much choice. So they will not refuse to negotiate with you under normal circumstances. However you have to make sure that you are regularly paying your monthly interests.
Question: Can I negotiate for some specific payment options that suit my financial condition?
Answer: Of course you can. For instance you can request lower monthly payments plan which will help you to become financially stable. You can also negotiate with your creditors for a forbearance program.
Question: What is a forbearance program?
Answer: A forbearance program allows you to delay payments for a short period of time. It should be kept in mind that you still have to pay the entire loan. You are only given some time to get back on your feet. It should be a part of credit card debt negotiation.
Question: Is it possible to waive penalties like late fee charges?
Answer: It is difficult be say. However , you should always request your creditors to remove penalties for late fee or over limit charges. Even if you manage to get a temporary waiver, it will save you some hard earned money.
Question: Should I negotiate for a credit card debt settlement plan with the creditors?
Answer: If you financial situation is quite critical , you can demand a settlement with the credit card company. It requires you be a few months late with your payments to be eligible for such a loan. Generally speaking the credit card companies likely to accept the proposal. This is because credit card debts are usually unsecured in nature. There are no collateral's to recover the money if you fail to make any payments at all or go bankrupt. So by refusing settlement offer the creditor risks losing everything It is in their best interest that they should help you. However , it does not mean your creditors will readily yield to your demand.
Question: What happens if my creditors still deny a settlement plan?
Answer: In that case your safest bet will be bankruptcy. You should explain to the credit card company that you are preparing to declare yourself bankrupt. Under the circumstance they might lose the entire outstanding amount. People who have been unable to pay their dues for months appear as bankruptcy candidates. If you can prove things accordingly things should work out.
Question: How much money do I need to pay in a credit card settlement plan?
Answer: It varies. Generally you have to pay something between 30%-50% of your outstanding balance. Much depend on the creditor , the age of the debt and your monetary condition. Always offer less than what you are willing to pay. It will provide you the space to negotiate.
Question: It is mandatory to pay a lump sum amount for a settlement plan?
Answer: Creditors prefer a lump sum. They are less likely to agree to a settlement plan which is spread over quite a few months.
Question: Will a successful settlement negotiation have negative impact on my credit report?
Answer: Unfortunately, it will. So you should ask the collection agency to remove their notice from your credit report. It is your legal right. Next you have to pressurize your original creditor to register your credit rating as “paid as agreed” or at least “settled”. The latter rating is negative but better than “paid charge-off” . Negotiating this term should be relatively easy . The credit card companies are after your money and not your credit rating. It is relevant to mention here that your credit report will look worse if you file for bankruptcy.
Question: Do I get any tax benefits with credit card settlement?
Answer: Actually it’s the other way round. It you manage to get rid of a relatively large part of your debt you will be taxed for it.
Question: Is a verbal agreement enough?
Answer: Absolutely not. Credit card companies are not always trustworthy. Make sure that you get everything in writing. All kind of communication should be made by registered mail. If possible even try to record the phone calls.
Question: How do I know when my creditors have crossed the line and started exploiting me?
Answer: Your rights as a consumer has been outlined by The Federal Trade Commission through the Fair Debt Collection Practices Act. Do get in touch with them for more.
Question: I am a bad negotiator. So what if I do not want to negotiate with the debt collectors myself ?
Answer: You can very well hire a credit counselor with the help of The National Foundation for Credit Counseling. A experienced credit counselor may be the ideal one to crack deals which you can’t.
Question: How long does a credit card debt settlement process take?
Answer: If you are planning for credit card debt settlement then try to take as long as possible to accumulate the required funds. Otherwise you should act quick because interest starts accumulating on the outstanding credit.
Be confident and make a smart credit card debt negotiation by following the above points.