8 Tips For Negotiating Debt Settlement

Are you struggling to pay off your debt? Are you considering negotiating a debt settlement with your creditors? If so, you're not alone. Getting a debt settlement isn't easy, so here are a few tips.

What Are Credit Card Debt Settlements? Before making a Bank of America Credit Card Settlement, bear in mind the following:

  • A card settlement will appear in your credit records for seven years.
  • Your debts won’t disappear entirely. Paying 40-80% lump sum depending on the status of your debt.
  • Debt settlements negatively impact your credit score.

Credit card debt is a wise option worth considering.  Debt settlements involve negotiating with credit card companies to reduce the amount of money you owe. It is a standard option for other kinds of debts like medical debts. 

Debtors prefer debt settlement because they should only pay a portion of what they originally owed. You can attempt this on your own, and depending on your patience and negotiating skills, reaching a fair settlement is highly possible.

Some debt settlement companies can take care of the negotiations for you. However, be prepared to pay them a hefty fee.  Any amount forgiven can also be subject to income tax.


Tips For Successful Debt Settlement Negotiations

If you decide to go for a DIY debt settlement, the following tips will help you become successful. 

1. Assess Your Debts.

Understand how much you owe. Re-evaluate your finances and check if you can pay off some debts without going through a settlement process. Know your creditors, so you know who you’re negotiating with.

2. Research The Process And Be Prepared.  

There are a lot of online resources that will guide you on the step-by-step process of handling a settlement. Ensure you understand the steps and are familiar with various letters and documentation. 

3. Keep Some Cash 

Debt settlement requires paying a lump sum of a portion of what you owe. Although some creditors may allow monthly settlement payments, you will have a better hand at negotiating if you can offer a lump amount. 

4. Negotiate Less Than What You’re Willing To Pay For. 

Start your negotiations with a smaller amount, typically 40%-50%. This will allow more room for talks since creditors aim to collect as close as possible to the original amount. You can end up settling for 50-60% of the original amount. 

5. Know The Right Time To Negotiate. 

If you negotiate when the debt is with the original creditor i.e. the credit card issuer, expect to pay as much as 80% of the total amount. However, if the debt goes into the hands of a third-party collector, you can negotiate for a lower amount. Collectors already earn a profit when they purchase your debt from the original issuer and are more likely to settle for a lower figure. 

6. Keep Everything In Writing. 

When you are ready to negotiate, send a credit card settlement offer letter to your creditor. Never accept a verbal settlement whether in person or over the phone. Make sure all the terms are in black and white. Getting everything in writing will protect you in case of legal challenges in the future. 

7. Be Patient And Persevere. 

Negotiations can involve a lot of back and forth. Be patient when dealing with the settlement process and remain professional throughout the entire time. It can be tasking and stressful but with the right attitude, you can come out on top. 

8. Pay Everything On Time And As Agreed. 

When you’ve settled, make sure to pay every penny agreed upon. If there’s a monthly payout schedule, don’t be late in making the payments. This will help you regain your credit score in due time and avoid any legal disputes. 

Is A Charge-Off Worse Than A Collection? 

Charge-offs are worse than getting your debt into collections since you can’t easily have them removed. They happen when a creditor has given up that you can pay your debt and decided to account for it as a loss. They then sell it for a meager amount to a third-party collection agency that will attempt to collect the debt. 

Charge-offs stay in your credit score for seven years. However, since your credit score is already damaged the moment you fail to make timely payments, getting your debt charged off won’t do any additional harm. If you’re considering a USAA Credit Card debt settlement, this can also allow you more room to negotiate with the new debtor. 

To learn more about managing debt and understanding credit card payments, check out our resources at Processing Card for more articles.

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