Maybe an unexpected medical bill or a broken device triggered your credit card debt. Or have you just gone over budget for one reason or another?
There are countless ways that debt starts to pile up and gets out of hand before you know it. It is obvious from Experience data which shows that US credit card holders have an average balance greater than $ 5,000.
Whether you need to pay off above-average or below-average debt, you might not realize that a simple, free method could help you from an unexpected place. It starts with a phone call.
The road to get out of debt
First, get a good idea of how much you can afford to spend on your debt, whether it’s in the form of a monthly payment plan or a lump sum.
When you pay only the monthly minimum (or less) on a large balance, your debt will likely last for months or years, and your interest rates will almost certainly rise. You may find yourself stuck in a cycle where the amount you owe keeps increasing even when you are making payments, and a bad credit rating means higher interest rates when you borrow in the future, so which will end up hurting your chances of get the best price on a car loan Where find a low mortgage rate.
When you know how much you’re willing to pay on your credit card debt, it’s time to negotiate. That’s right: you can try to get yourself out of some of your debt.
Believe it or not, your lender probably wants to help
Just asking your bank or other credit card issuer for a better deal is worth a try. Asking for a new repayment plan or an agreement to settle your debt is a strategy commonly used when negotiating with your credit provider.
Contact the card issuer and ask, politely but confidently, if you can work out a payment plan. Be prepared to itemize how much you can afford. While there are different areas where you can negotiate, you’ll want to start with the offer that saves you the most money and gets you out of debt the fastest.
If you get the chance, most card issuers are more than willing to make a deal with you rather than risk you defaulting on the account and paying nothing.
Most importantly, stick to the terms of your new plan. If you don’t, the credit card company will be less likely to cooperate more with you. Only accept payments that you can handle until the debt is gone.
Different types of renegotiated payment plans
Ask to stop your interest
Apply for a plan to make monthly principal payments – the total fees you accrued before interest started charging.
The card issuer can close the account and you continue to pay the debt, but the new interest charges cease.
Or the lender can waive the interest you owe and divide the remaining balance into manageable payments. Either scenario keeps your debt from growing.
Offer a lower lump sum payment
You can also try to negotiate a large one-time payment that is less than your balance, but the bank will accept the amount to be refunded and close the account. For example, if your balance including interest and fees reached $ 5,000, you could offer to pay your original line of credit amount of $ 3,000.
If the card issuer accepts, you could save thousands of dollars and your debt will be considered fully paid.
Ask for a lower interest rate
As a last resort, ask for an interest rate reduction. Card issuers are more likely to agree if your payment history is consistent and you agree to close the account or freeze purchases. You will switch to regular monthly principal payments with a negotiated and reduced interest rate.
Pay a pro to help you or negotiate your debt yourself
Many people are successful in negotiating with their lender on their own. But if you need help, a credit counseling service, debt settlement company, or lawyer familiar with credit issues may be able to help.
Debt settlement company fees typically include a percentage of the amount the company ultimately saves you by negotiating a lump sum payment. Credit counseling services take an amount you provide and negotiate with your creditors to make small payments at all. The fees can run into the thousands of dollars.
Research any business you are considering. The Federal Trade Commission describes red flags for debt settlement scams, as a company that guarantees it can wipe out your debt or tell you to stop contacting your creditors without explaining the repercussions.
More ways to avoid debt
Why you ended up struggling with your bills – a series of bad luck, an unforeseen crisis, or just bad spending habits – is less important than finding a way out of your debt.
Stop paying too much interest. When you carry balances on multiple cards, you can reduce your interest rate when you combine your credit debts.
Shopaholics: Take control of your shopping. This long-standing advice is worth remembering: buy only what you can pay each month. When you need to find the best deal to stay within your budget, you might find a online shopping comparison tool useful.
Understand your credit score. Getting out of credit card debt and monitoring your credit score go hand in hand. A free credit report helps you track your progress to improve your score, which increases your chances of getting better interest rates in the future.
Put your leftover pennies to work. While your credit debt is an urgent financial priority, you can always save money for later by investing money that you won’t miss: the pennies and dimes you have left over when you buy something. thing. Here is how you can invest your “spare currency”.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.