It is important to know that credit negotiation services isn’t always the right option for everyone. Negotiating a credit card settlement is designed for those who cannot make the minimum payments or are suffering financial hardship such as unexpected medical expenses or the loss of a job. And if you do choose negotiating credit card debt, know that creditors will not always say yes or may not say yes in the first round of negotiating. However, debt settlement negotiation is the prefered option of creditors.
The types of debt that are eligible for credit debt negotiation are unsecured debts, or debts that do not have collateral. These debts include credit card debt, personal loan debt, some private student loan debt as well as medical debt. Secured debt such as vehicle loans, federal student loans, mortgages, utility bills and tax debt are not eligible for credit negotiation.
How Credit Card Negotiation Services Work
To start, you will consult with a credit negotiation services to see what your best option is. If debt settlement negotiation is the right option for you, the credit card negotiation services agency will try to figure out what the best credit negotiation agreement or outcome would be for you.
Once the debt negotiation services agency has determined has determined that negotiating a credit card settlement is the way to go, you will begin to make a monthly deposit into a credit debt negotiation account. Once you have built up enough in your account, debt negotiators will begin negotiating a credit card settlement.
Credit debt negotiation is based off of your financial capabilities. If a creditors believes you are capable of paying off all your debts, they may agree to lower the interest rate. They may also agree to a longer payment period. Sometimes, debt negotiators are able to get creditors to agree to a lower principal balance. When a debt settlement negotiation is reached with your creditors, your debt negotiators will contact you for authorization.
Once you have authorized a credit negotiation agreement, payment will be processed to creditors from your credit negotiation services account. Some settlements involve a lump-sum payment while settlements are structured with multiple payments over time.
Make sure to choose a reputable credit card negotiation services agency. A good company will only charge you fees for their credit negotiation services. A credit negotiation company should not charge you fees for any other reason, per regulation established by the Federal Trade Commission (FTC). The fee is typically a percentage of the total amount of debt enrolled in the credit negotiation services program.
Terms of Credit Negotiation
A Short-Term Solution for Negotiating Credit Card Debt
If your financial struggles are only temporary, such as the temporary loss of a job, a short-term negotiation solution may be for you. Debt negotiators can try to negotiate forbearance, in which you ask for a temporary reduction in payment. This would reduce your minimum payment until you are able to get back on your feet and make higher payments.
Long-Term Solutions for Negotiating Credit Card Debt
If your financial troubles are not temporary, then a long-term solution is right for you. This type of credit debt negotiation usually involves debt negotiators asking for a longer pay period, a lower interest rate, and/or a reduction on the principal balance owed. Your payment may be in one lump-sum if you have the money on hand, or may be a structured settlement in which you may several payments over time. This solution generally has a negative effect on your credit score, however, it can save you money in the long-run if the debt settlement negotiation includes ar reduced balance or lower interest rate.
Why Credit Card Companies Agree to Debt Negotiators
Credit negotiation is the preferred option for creditors. Ideally, credit card companies want all of their money back including interest and fees. However in some cases, they realize that getting everything you owe them just isn’t realistic or that using a collections agency or lawyer just isn’t worth the expense. This is why credit card companies agree to debt negotiators in a credit negotiation–receiving some funds is better than receiving none and it can be more cost effective than lawyers and collections fees .
When You Shouldn’t Start a Debt Settlement Negotiation
Negotiating credit card debt isn’t the right option for everyone. If you have less than $7,500 in unsecured debt, credit counseling might be a better option for you. If you are also focused on maintaining a high credit score during the debt relief process, negotiating a credit card settlement may also not be for you.