How non-profit agencies or “for-profits” can help you negotiate credit card debt
One of the more effective ways to reduce credit card debt is by negotiating using third party companies, whether you use a non-profit organization or even a for-profit one. Specialists at these agencies provide numerous services to consumers. The negotiation process can sometimes go by other names, such as just plain old debt settlement, DMP or consolidation. Find more information below on using a company to help you negotiate any past due credit card debt.
Credit card negotiation is an effective yet fairly simple process to reduce and possibly eliminate your debts (or maybe a large portion of it). Or the concept can help you reduce interest rates or get more favorable terms on any money you owe. If you seek a partner to help, involves working with a party who has your best interests in mind. While negotiating better terms or payments on your credit card account(s) may sound like an easy thing to do, it is usually a difficult process without using professional help.
Low-cost or even free non-profit credit counseling can be used to negotiate
The organization you partner with, whether local or national, will help you in negotiating with a credit card company to have your total outstanding obligations lowered. A certified non-profit counselor reviews your budget and accounts, then helps you decide whether negotiations (including a debt management plan) makes sense or some other option to get help with credit cards.
With a negotiated program you will improve your chances of getting relief from your creditors. A non-profit will partner with you while working to reduce interest rates, waive late fees, and bring accounts current. This is a repayment strategy, not a quick write-off, and it typically avoids the credit and tax problems tied to settlement offers. By having your unpaid debt terms renegotiated to a more affordable payment, you will be able to start afresh and free yourself from the financial constraints that your bills are having on your family and you.
- While this practice is becoming more common and effective, there have been shown to be a few restrictions when it comes to credit card debt negotiations that occur as part of it. For example, lenders will often have second thoughts about negotiating down your outstanding debt if you have filed for any type of bankruptcy protection in the last seven years or so.
- In addition, there may be some push back if the creditors research your history and discover recent trends in your purchases that show poor budgeting decisions or lack of financial discipline. As an example of this, if they discover that in the last recent months that you have purchased a new house, car, or other expensive luxury items such as jewelry, then a credit card company will most likely refuse your requests to work with you to negotiate your debt.
All that being said, banks tend to cooperate with reputable non-profit counseling agencies (like Money Management International, Apprisen or National Foundation for Credit Counseling screened agency) because steady payments from a customer and reduced interest are better than a charge-off. When you are still current or only a little behind, counselors have the best chance to secure lower rates and fee relief so you can finish repayment on predictable terms.
- In effect, if a credit card issuer notices that you are always behind on paying your monthly bills, they will fear that you will file for bankruptcy and that they will get less money from you. So many decide that working with you or a third party non-profit company to provide a consumer with help is also in their best interest. They would rather collect some money than have you file for bankruptcy and collect zero.
A nonprofit counselor’s negotiated plan, whether a DMP or something else, usually lowers costs by cutting interest and fees rather than erasing principal. That is why negotiated deals tend to be more stable for many households and why the credit impact is often gentler than settlement. Typical nonprofit fees are modest and regulated by state rules, with many agencies waiving them for hardship; first sessions are commonly free. More ways to get help from debt collectors.
- If you are already deep in collections or being sued, a counselor can still walk you through options, including whether settlement or bankruptcy is the better lane. If bankruptcy is on the table, federal law requires approved counseling before filing, and the Department of Justice keeps the state-by-state lists of approved providers.
For-profit debt reduction companies can be used for negotiating
By contrast, for-profit debt reduction or settlement firms usually negotiate for principal reductions, known as debt settlement or forgiveness. If successful, they generally collect percentage-based fees on enrolled debts. However note a for-profit cannot legally charge you any fee until at least one debt is negotiated down to a smaller balance (“settled”) and you have made a payment on that settlement.
- Depending on the company you are working with and asking for help from, you will have a lot of work to do in advance of these discussions if you want the negotiation process to be successful. But the good news is that there are many for-profit credit card debt negotiation experts out there that are willing and able to help out individuals.
- That advance-fee ban has been in place for years under the FTC’s Telemarketing Sales Rule. Even with that protection, settlement can harm credit during the nonpayment period and any forgiven balance may lead to a Form 1099-C at tax time unless an exception applies.
Studies show that on average if you use a credit card negotiation expert, then they can help you reduce your credit card debt by on average 40%-60% with more counseling data here at the NFCC site. https://www.nfcc.org/credit-card-debt-counseling. And many times they can also help with other bills. A 40-60% reduction is an incredible statistic considering that many individuals who try to negotiate their debt by themselves usually end up giving up the fight as it is difficult, time intensive, and they may not have success themselves.
A final point many people miss: taxes. When a creditor forgives part of what you owe, the IRS generally treats the forgiven amount as taxable income unless an exception applies, and creditors typically issue Form 1099-C when cancellation is $600 or more. Counselors can flag this early so you are not surprised the following spring.
How to search for a company to help you negotiate credit card debt
Start with nonprofits. Look up agencies through the National Foundation for Credit Counseling or the Financial Counseling Association of America, both of which list nonprofit providers serving your ZIP code. Ask about counselor certification, all fees, typical creditor concessions for households like yours, and whether hardship waivers are available. These directories help you avoid lead-generation sites and unvetted firms. To locate a specialist that can help with negotiations, find a listing of non-profit credit counseling agencies to contact.
If you still consider a for-profit negotiator, vet it carefully. Confirm that no fee is due until an actual settlement occurs and you have paid on it, that your funds are kept in a dedicated account under your control, and that the company discloses likely credit impacts and lawsuit risk in writing. Compare the total settlement fees to what you would save in interest and penalties under a nonprofit plan before signing anything. The FTC’s guidance explains the fee rules clearly and is worth reviewing.
- The company needs to establish a debt settlement program that is fit specifically for the individual persons needs and financial condition. You should be sure that they provide you with all possible pros, cons, and options so that you can come up with an informed decision on the various factors including what exact debts to include in your program. They should work closely with you so that you both decide on what is a realistic amount that you can afford to pay each and every month towards your debts and bills. Read about questions to ask a debt settlement company.
When searching for a debt settlement program and company to use, a good plan will include the consumer in the settlement process. So any program you agree to needs to be transparent. The consumer wants to ensure that everything is fully documented and agreed to by them.
Conclusion
Debt negotiation works best when the strategy matches your situation. Nonprofit credit counseling focuses on lowering interest, stopping fees, and stabilizing accounts through structured repayment. For-profit settlement aims to cut principal but carries tradeoffs in credit, collections risk, and taxes. If bankruptcy might be necessary, use a DOJ-approved counselor first. Whichever path you choose, act before accounts age further into delinquency; that is when your options shrink and your costs rise
If you want to reduce and get out of debt, you need to take action. Often times people are too proud to ask for help. Do not let pride keep you away from contacting a great debt negotiation company. Contact a company to learn more about programs they offer and ask them for a consultation. Rely upon the top professionals to do the work so that you can be debt free.
Related Content From Needhelppayingbills.com
|
