Being head over heels in credit card debt can be frightening, especially when you know that you are unable to pay your debt off completely. Depending on your situation, many credit card companies will agree to settle for less than what you owe, either in the short term, or for a final settlement of the debt.
Settling for Less on the Monthly Payment
If you are having trouble making your monthly payments, there's a good chance that your credit card company will agree to settle for less each month than your minimum payment due. The sooner you act, the better, because you want to still be in the creditor's good graces when you call and ask for a hardship agreement. Be willing to give the credit card company a good reason why you cannot pay your bill in full, such as unemployment, illness or other catastrophic event. While the hardship agreement is usually temporary, it may buy you some time to get back on your feet.
Settling for Lower Interest/Fees
Sometimes, it's the interest and fees on your credit card that makes repaying your debt impossible. When you contact your credit card holder, it may be a good idea to ask for a reduced interest rate, or a removal of fees that have caused your balance to skyrocket. Often, reducing interest or fees alone will reduce your payment considerably, and will make your debt manageable. Again, the creditor may only agree to this arrangement temporarily, but it may be enough to help you get your debt under control.
Settling for Less Than the Total Debt
It's rare that credit card companies will allow you to simply pay off the debt you've racked up for less than what you owe. In most instances, the account has to be seriously past due, and often in collections, before settlement is an option. The card holder or debt collector may agree to a settlement, if you can pay the amount in full, and if you're already in collections, or the account is months past due, you have little to lose by asking---the damage is already done to your credit.
Beware Settlement Companies
If you're thinking of settling your debt for less than you owe because of advertisements you've seen for companies that can promise to settle your debt for pennies on the dollar, beware---these claims usually have little basis in truth. Often, these settlement companies will require you to stop paying your bills, which will destroy your credit, and to pay them stiff fees for their services---money that could, and should, go to repaying your debt. You're better off attempting to deal with your creditors yourself, and if that fails, you should instead seek credit counseling from a reputable agency (see Resources).
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