It is the end of the month, and once again you find yourself in a stressful situation – you are able to pay only 50% of your monthly debt repayment, and your credit company doesn’t seem very patient with you.
Credit card debts are classified under the unsecured debt group – what this means is that you are probably paying a higher interest rate than if it was backed by collateral. Credit card companies and other lenders raise interest rates because of their own risk in issuing an unsecured credit card or loan.
If responsibly used, credit cards are a great thing. Still, most people seem to rack up a huge credit card debt in just a few months. This is caused by overspending habits and a lack of effective budget planning.
If you think there is no way to control your spending habits, we recommend that you completely exclude credit cards as a financing option. This way you will save yourself from daily stress and exhausting repayment methods.
Not all is lost for those of you in credit card debt though – negotiating your way out of this situation is always an option, and believe it or not, if you have the right approach, even a big credit card company can agree to your settlement plan.
Still, the question remains – can you do it on your own or you need to hire a professional. Along with that, negotiating is not simple, and there are certain critical steps that you need to take in order to be successful.
Before guiding you through the process of credit card debt negotiating, there is a question you need to answer – is your financial hardship caused by a temporary loss of income (you don’t have a job), or it is a long-term issue?
Depending on the answer, you will be applying different strategies. What Lies In Your Debt is a great program that will allow you to learn more about negotiating strategies as well as instruments that you can use in the process.
If your repayment issue is only temporary, your chances of negotiating a good settlement are significantly higher. The most common instrument in a short-term settlement is called forbearance – you ask the credit card company to waive the late fees, and lower interest rates or monthly payments for only a few months until you get back on your feet. Most credit card companies will freeze your credit card account as a part of the settlement unless you ask them not to.
While negotiating a short-term solution seems somewhat simple, long-term payment reduction is more complicated. Let’s take a look at the few steps process.
Before moving forward in your negotiating process, you should sit down and do some basic preparation. First, calculate how much you owe, taking into consideration all your credit cards. Once you have done that, you should Google and write down the customer service numbers of the relevant credit companies. While this is the initial step, you shouldn’t pick up the phone and negotiate until you know your options.
You should know that in most of the cases, a long-term repayment negotiation will affect your credit score (lower it), while in certain scenarios you might need to pay additional taxes. That is why relevant research is always a must before entering the exhausting process of credit card debt negotiation. We recommend that you become a part of What Lies In Your Debt program and get a better insight into your options.
The most common negotiation option is the workout agreement. It is a long-term payment settlement and, in most of the cases, you will either ask for the credit card company to waive your late fees or lower the interest rates.
Another option is to agree on a lump-sum settlement – it can result in your debt being reduced to only the left principal. Still, most credit companies ask for an upfront payment so this is not an option if you are facing hard financial challenges.
Apart from these two (personal negotiation), you can either apply for debt management (done by an NGO) or a debt settlement that is done by third-party companies that act as mediators between you and the credit card company in order to find the right solution.
While you may be eager to pick up the phone now that you know your options, it is still not time. Before moving forward you should know all the possible risks of debt negotiation.
First, in most of the cases, the credit card company will close or freeze your account which means you will not be able to make any additional charges for the time being. Apart from that, you might need to pay taxes on the debt that has been erased, and you should expect that debt negotiation will result in a lower credit score. Last, third-party companies ask for an upfront payment, while a successful result is not always guaranteed.
Now it is time to make that critical call. While hiring a company to do it for you, we think that negotiating on your own behalf is always a better decision and that your chances will be higher especially if you know the right way to present your financial situation.
Call the credit card company and ask for the department that deals with debt settlement. Be sure to monitor and write all the details of your conversation with them (including names of people you were talking with, etc.). Present them your current financial issues, and suggest a possible solution. Don’t get demotivated if the first phone call is not enough. Instead, learn from your mistakes, and make a few more, being honest and persistent in the key.
If you manage to successfully negotiate your way through, be sure that the deal is in writing, so you have proof, which is much more valuable than a verbal agreement.
You are constantly stressing about your monthly payments, and being in debt doesn’t seem to have an end. Still, you shouldn’t put out the white flag just yet – instead, get educated on your options and the tools available to you, and negotiate your way through to a credit card debt restructuring.