You’ve got a lot of credit card debt and you don’t see the light at the end of the tunnel. You’re probably having to put basic like groceries and gas on your credit card, and the minimum payments are getting harder and harder to pay. Maybe you’ve just suffered a drop in income (or a job loss). Either way, you’re looking for a way out.
The scenario above is getting more common and so is the fact that people are getting desperate to get out of debt any way possible. But what’s not that widely known that credit card companies will actually forgive a portion (sometimes almost all of it) if you can demonstrate a severe financial hardship. It’s been around for while, but this debt settlement option is growing in popularity and you can do it yourself if you have time and patience.
Here’s a few steps on how to negotiate settlements on your credit cards by yourself. Remember, these tips are only suggestions. Every situation is different, and there’s no guarantee that you will even achieve a settlement.
5 Basic Tips to Settle You Debts Yourself
1. Know What Your Goal Is
First of all, you’re not going to get a settlement with a creditor of you are current all your payments. There’s no reason for them to give you anything if they see a steady stream of money coming to them from you every month. So, you should expect that you need to be at least 60 days late on a payment before they will talk seriously with you about a settlement.
Your goal is a settlement. A portion of your principle. A sum less than the balance on your card. They might try to get you into a special payment program or a consolidation product where you still end up oweing the full balance. Don’t buy it. Remind them you want a settlement.
Your goal should be to get at least 50% off the balance you owe on your account. It’s not uncommon for creditors to accept only 20% on your account, but that’s pretty rare. On one of my accounts, I settled for 20%, but that came after a bunch of hassle. So if during your first interaction with your creditor, they only offer you an 70 or 80% settlement, just wait it out for a little longer, which brings us to our next point….
2. Be Patient
Negotiating with a credit card company is sometimes like talking to a mule. They can be obstinate and WILL treat your poorly. They won’t even begin to talk about a settlement with you until you are at least 60 days behind on a payment and at about 90 days, most creditors will begin to think that you are serious about your deteriorating financial condition.
You WILL have to endure harassing phone calls. You WILL be getting a bunch of threatening letters. They WILL ask invasive questions about your life and financial condition. They WILL pull your credit history to see if you are lying to them.
So you will need to be patient and also you’ll need to stay in pretty frequent contact with the credit card company. You’ll also need to constantly remind them that you are serious about a settlement.
Most negotiating will take place at around the 90 to 120 day mark and it will involve going back and forth with them over a period of weeks. So patience is key.
3. Be Polite
Always keep in mind that you are being given a GIFT. If you get a settlement, it’s like someone just handed you a large sum of money. Always be grateful and polite one the phone with them, even if you hate the company with every fiber in your being.
Remember these facts: 1. You owe the money. 2. They are giving you a big break.
So with that attitude in mind, be apologetic on the phone with them about not being able to pay. Explain that you are in some serious financial trouble and are trying to get some money from family and friends. You will get a lot further (aka a better settlement) with them by being kind and polite with them, despite their rudeness.
4. Negotiate like a Professional
Your creditor is looking to the money back that they lent to you, so they will be trying any trick in the book to get it back. If you can convince them that you are considering bankruptcy, then they will be in a position to be willing to take an amount less that the full balance on your account. They are looking to get something, anything back.
Fortify Your Position
The point here is not to trick them. Tell them the truth. If you make $100K and still have your job, you won’t catch a break, so you really do need to be in a bind to get a settlement. Most credit card companies will check your credit report to see if you are behind on other accounts as well. If you are, the better the chances are that you will get a good settlement.
Explain your circumstances. Good words and phrases to use are, “I lost my job and I can barely buy groceries and make my mortgage.” or “I’m borrowing money from my Aunt Janet for my rent and I can’t pay you right now.”
How to Make a Settlement Offer
They way to actually introduce a settlement into the conversation is to say things like, “I might be able to borrow some money from my grandma when I see her next week, I probably could get $2000. Would that be enough to settle the account?” OR “I really would like to settle this account. What amount would it take to come to an agreement?”
Ideally, you’ll be setting the initial negotiating amount. Then the back and forth can start from there. You don’t want the credit card company setting the bar too high.
5. Get it in Writing
This is perhaps the most important point. As I said before, credit card companies are a tricky bunch. They’ll try to get you to send in a payment to “secure the settlement”. Don’t fall for it. Request everything in writing. If the creditor is serious about settling with you they will do it right and overnight or fax you a letter with the settlement details on it.
You must follow the instructions and they will usually give you a set amount of time to get the check to them. Get a certified or bank check and send it certified mail.
For a much more comprehensive guide to help you settle your credit card debt by yourself consider looking at ZipDebt. They offer a great package of information that will give you the ammo you need for a great settlement. Charles Phelan, the man behind the program, offers a free 32-page guide on do it yourself debt settlement. Check ZipDebt out here.
Hopefully this will help you in your discussions with your credit card company or whoever your debt is with. Keep in mind there’s no guarantee that you’ll be able to settle the account yourself and some companies won’t even talk to you. But it’s worth a shot. At least a few actually.