Credit card debt can become burdensome and collection calls, delinquency notices, and past due bills can add a considerable amount of stress to anyone’s life. There is, however, a way to alleviate an enormous amount of that stress while cleaning up your credit and/or getting up to date on your bills. You can settle out your credit card debt for sometimes a small fraction of the original balance, and save yourself money, time, and stress.
What Is A Settlement?
A settlement is an agreement between yourself and your creditor to consider an outstanding balance settled or paid in full for an amount lower than the balance owing, generally to be paid off in a lump sum, or within a couple of installments. While it is more common for creditors to accept and consider settlements on large debts, as a lump sum payment benefits them more, and there is more interest to toy around with, no amount is too large or too small to try and settle.
Negotiating Your Settlement
First contact your creditors, but remember going into this that you have the upper hand here, if you know what to say and what not to say. They want this debt paid sooner rather than later, and unless you give them leverage, they won’t have any against you; the ball is in your court. Don’t tell them that you’re doing this so you can get a loan approved, or get into a new apartment complex. They will know you are in a tight spot and need to get this taken care of, so they will be less likely to come down on their price. Simply tell them you’d like to get this taken care of, and you’re in a unique position to possibly settle this debt.
Let them know they’re not the only ones, and if they don’t like your offer, another creditor probably will, and they will have to wait in line again. As with any negotiation, you’ll want to start very low, possibly as low as 10 cents on the dollar, especially if the majority of your balance owing is interest. Every negotiation that goes through met somewhere in the middle ground, and you want that middle ground to be as low an amount as possible.
Your ability to immediately pay a lump sum of the amount you’d like to settle for will greatly increase your chances of an effective negotiation, because then the company gets paid immediately and if the individual you are speaking to is on a commission based pay, they’re going to start hustling to push through what they’re considering their bonus check.
If your creditor or collector is unwilling to negotiate a settlement on the principal balance, tell them you want the interest written off. Explain your financial situation, explain why you got into the position you’re in. Sometimes sympathy actually works in your favor, whether or not you’re embellishing some details. DO NOT seem vulnerable and easy to threaten or take advantage of and DO NOT let them know you ‘need’ this for one reason or another.
As long as you engage in smart negotiations you should have no problem reducing your debt significantly with settlements.
Author Bio: Steven Watts writes for the Frugal Vulture, a good source for personal finance information.