How to negotiate with a debt collector

Falling behind your payments for a credit card debt

Falling behind your payments for a credit card debt

Falling behind your payments for a credit card debt or any other type of loan is never pleasant. You might also have a debt collector who is also on your case and constantly following up on the progress of your payments. It can be draining to receive constant emails or calls from your debt collector yet you are already trying your best to clear the credit card debt. So, how can you negotiate with a debt collector so as to be relieved from such situations?

You’ll have the option to use a company to get you payday loan relief, or if you prefer DIY then here’s how to do it:

The important thing in such situations is working on improving your credit score. You could do this by negotiating with your debt collector and have them report your debts in a certain way. This will enable you to have a credit report that does not have negative information. Therefore, you will be in good standing when a potential creditor views your credit report in the future.

The other option that you have is to offer to make monthly payments. However, before doing so, the debt collector may have you fill out a statement, declaring your income, expenses and assets. Ensure that you give out information that is true because false information may do more harm to your case, if you are signing the papers under the penalty of perjury. Also, you may give information that may work against you, so be cautious of what information you will provide. You should ensure that the monthly payment does not strain your finances and you will be able to cater for your other expenses and bills comfortably. Ensure that you have written agreements with your debt collector after you are done with the negotiations.

If you can afford to make a lump sum payment, you may negotiate for this with your debt collector. You have to set a

Lump Sum Payment

Lump Sum Payment

specific amount that you are willing and able to buy and stick with it. Do not agree to pay a lump sum that amounts to more than what you are able to pay off at that time. This is because a debt collector may assume that since you are willing to pay a lump sum amount, you are able to pay off the debt with an amount higher than that which you have suggested. Most creditors will settle for half the amount that you owe them, whereas others may want 70% to 80% of the amount owed. In cases where the debt collector thinks that the chances of you repaying the debt are minimal, they may settle for a third of the amount owed or less.

Negotiating with a debt collector is beneficial for you and the creditor. This is because you will be able to settle the debt with less pressure and they will achieve their objective of maximizing their returns. The debt collector will be pleased if you are willing to pay back a percentage of the amount owed. However, you need to consider your financial situation and not promise what you cannot deliver. This avoids the vicious cycle being continued as you may get from one debt to another. Be realistic when negotiating with your debt collector and you may just turn around your financial situation for the better.

Myths about credit card debt settlement

There are various myths that surround credit card debt settlement. A debtor may not tell apart the truth from these myths that are often told. The following are some of the myths associated with getting out of debt and the truth about credit card debt settlement:

You Need to pay someone so as to get yourself out of debt

You Need to pay someone so as to get yourself out of debt

Myth 1: You need to pay someone so as to get yourself out of debt.
Fact:
This is not often necessary in some instances. There is an increase in the number of debt settlement companies that are scams. Do yourself a favor and avoid losing more money to such scams. The situation is only well understood by you and you can negotiate the debt settlement terms for yourself. A debtor will put in more effort to get out of debt than one who is hired to do this. However, it is agreed that in some instances, it will be advantageous to have a negotiator or a payday loan debt settlement company.

Myth 2: An individual’s credit score will not be hurt by credit card debt settlement
Fact:
Settlement of debt, just like bankruptcy can affect your credit score. Although debt settlements and defaults may not influence your credit score if they are not reported, this is just a temporary situation. The truth of the matter is that debt settlements are normally reported, eventually.

Any individual with a good reason can get their credit card balance slashed into half

Any individual with a good reason can get their credit card balance slashed into half

Myth 3: Any individual with a good reason can get their credit card balance slashed into half
Fact:
There are underwriting criteria that are looked into so as to enable a debtor to have his or her credit card balance halved. Debt settlement companies and creditors will conduct a thorough screening to prove that one is experiencing the hardship that meets the underwriting criteria. A debtor experiencing hardships such as a divorce, temporary job loss and medical problems may get debt settlement.

Myth 4:  The debt will stay forever if I do not settle it
Fact:  
There are statutes of limitation in each state that limit the duration in which debt collectors may file lawsuits over credit card debts that are yet to be paid. Therefore, if a debtor has an unpaid amount over a number of years on a charge account, such a debt is not legally enforceable. This is because at such a point, the payment to be made will be considered voluntary and not in a debtor’s interest as negates the argument of the credit card debt collection limitation.

Myth 5: Filing for bankruptcy or getting debt settlement are my only options when I am unable to pay the credit card debt.
Fact:
These are options that are extreme, which may lower your credit score and you have other options such as getting forbearance. This is a situation whereby you may still be charged an interest on your loan, but you will be allowed to make payments in smaller amounts or to make no payment at all. Instances such as a job loss are considered for forbearance.

These are just some of the myths about credit card debt explained. However, if you find it challenging to settle your debt, do consider managing your finances well and be well informed on the options available to you.