Credit Card Debt Settlement Process

Ningthoujam Sandhyarani Jan 9, 2019
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Credit card debt settlement is a legal and genuine option for coming out of credit debts. Continue reading to know more about this process and how you can benefit from it.
Even though credit cards are useful for many applications like booking tickets, hotels, and purchasing goods, many card holders lend into debt every year. It is estimated that most credit card holders tend to spend about 12-18 percent extra money annually.
In fact, millions of American citizens struggle to pay the minimum due each month. If minimum payment is not made on time, the creditor charges a late payment penalty. In such a situation, the card user turns into a debtor over a period of time.
If the credit card holder is unable to pay the minimum due, then he/she can request for lowering the annual percentage rate (APR). With such a process, the annual interest rate charged on credit cards is reduced to a certain percentage, as per the company norms.
For example, if the current interest rate is 16 percent, it can be lowered to about 11 percent. In case, the card holder still fails to pay off the arrears, then it is high time to contact the lender for debt settlement. Let's discuss in brief about the steps involved in this process.

Process

There are debt counseling and management services, which you can rely on for carrying out the credit card debt settlement process. They will review the current financial condition and perform the necessary steps for settlement. Also, the service company handles the collection calls from the agencies in your favor.
Nevertheless, they will charge a certain fee for handling the procedure. Another cost-effective alternative is to settle arrears on your own. Here are the steps that you can consider while filing for a debt settlement:

Contacting the Credit Card Company

Once you have decided for settlement, contact the concerned company without further delay. The quicker you talk with the creditor, the higher are the chances for settlement. You can explain the genuine reason for proceeding the debt settlement process to the card issuer. While talking with the concerned person, make sure that you respond politely.

Negotiating Debt

While negotiating debt, start with a greater percentage like 70 percent. Depending upon your present financial status, the creditor will fix the negotiation amount. The average settlements fall within the range of 30-50 percent. However, the amount can be as low as 20 percent or as high as 80 percent. Don't negotiate for a very low percentage.

Dealing with Debt Collectors

Dealing with debt collection agencies can be considered as a worst nightmare. They use every trick in the book for collecting credit card payments that you owe to the creditor. You can send a written application to the creditor to stop being contacting by the debt collectors.

Duration

This process may take about a few months to a few years, based on the debt amount and the creditor rules. Some companies ask to pay a lump sum negotiation amount, whereas some give the flexibility to pay in parts for a period of time. You can also request a convenient payment option as per your financial condition.
Debt settlement is an effective, legal method to manage arrears. With this, there is no need for bankruptcy filing that affects the credit rating for years. You will be relieved from foreclosure even if the situation is serious. Another option is debt consolidation, where the balance of a card is transferred to another card with a low interest rate.
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