You can settle a credit card debt that is on a payment plan -- but only if the credit card company agrees. Settlements are voluntary agreements between two parties, and the card company cannot be forced to settle. The company offered you a payment plan to help you recover from a financial setback. Switching to a settlement will require more discussions.
Payment Arrangements
Payment plans generally allow your interest rate to be lowered and your monthly payment reduced for up to a year. It's a great deal for people who have fallen behind on their bills because of employment, illness or some other reason. By negotiating payment plans on all or most of your bills you save considerable money each month on finance charges and monthly payments. Some payment plans allow the interest rate to be waived entirely during the temporary period.
Alternatives
Although payment plans are helpful some people with large amounts of credit card debt see them as a dead end. They realize that the payments and the interest rate will increase after the temporary arrangement ends, and depending on the size of the debt it could take years to pay off the account with only the minimum payment each month.
Settlement
That realization leads some people to consider debt settlement as an option. Settlement allows you to pay off credit card debt for less than the full amount owed, with some companies willing to settle for 20 to 70 percent of the balance. Credit card companies usually allow settlements to be paid in installments over 90 days. For some people settling the account quickly at a discount is better than years of payments.
Credit Scores
Debt settlement damages your credit score because your credit report will show that the account was "settled for less than the full balance." Multiple settlements will show creditors that you are bailing out on your obligations, making it tough for you to establish new credit at reasonable interest rates. For some, poor credit scores for a while is worth the trade off to eliminate debt.
Negotiating A Settlement
Simply call your credit card company if you want a settlement. Tell the representative that you have decided that the payment plan will not work for you over the long term and that you would rather settle. Unfortunately, the card company may not take you seriously unless you start missing payments on the payment plan. Try to negotiate a settlement without resorting to that step, if possible. Keep calling the customer service department until the company agrees to a settlement that you can afford.
0 comments:
Post a Comment