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Credit card debt can put a major strain on your budget. As of the third quarter of 2020, U.S. adults carry an average credit card balance of $5,315, according to Experian.
If you can have this much or more in credit card debt, it might feel like you’ll never get out of debt. However, there are options available that could help you more easily manage your debt.
Here’s how to negotiate credit card debt as well as other strategies to think about:
- 3 options for negotiating debt settlements and agreements
- Other credit card debt solutions
- Steps to negotiate your credit card debt
- Help with credit card debt: Should you accept it?
- Why creditors are willing to negotiate
3 options for negotiating debt settlements and agreements
If you have a large credit card balance, you might be able to negotiate a debt settlement or agreement with your card issuer to manage it. But before you contact your credit card company, it’s important to compare your negotiating options so you can decide which one is best for your financial situation.
Here are three strategies to consider when negotiating a debt settlement or agreement:
1. Hardship agreement
Several credit card companies offer hardship programs for borrowers facing financial difficulties. For example, you might be able to reduce your monthly payments, lower your credit card interest rate, have fees waived, or agree to a repayment plan that better suits your needs.
Keep in mind that assistance options vary by company as well as by your individual hardship. You’ll need to contact your card issuer to see what help is available to you.
- New cardholders might not be eligible
- Could extend the amount of time you remain in debt
- Might be hard to get back on your feet financially before a short-term relief plan ends
2. Lump-sum settlement
If you are quite far behind on credit card payments and don’t see a way out, you could consider asking about a lump-sum settlement. This is when you settle with your credit card company for a percentage or portion of your outstanding debt rather than the full amount.
How much you might be able to settle for will depend on your card issuer, how much you owe, how many payments you’ve missed, and how much you’re able to reasonably pay back.
- Third-party companies offering debt settlement could be running scams
- Low success rate unless you’re particularly far behind on payments
- Can be difficult to negotiate before your account is charged off and sent to collections
3. Workout agreement
Another potential strategy is a workout agreement. With this option, you’ll negotiate a structured repayment plan with your creditors where you’ll pay off your credit card debt over a period of time.
You can also ask to modify your terms to make it easier for you to repay your balance in a shorter amount of time. For example, your card issuer might be willing to waive fees, lower your interest rate, or reduce your monthly payment.
- Can keep you in debt for a longer period of time as you’ll still need to pay off your balances
- Card issuers might cut off access to your cards so you can no longer use them
- Loss of credit could negatively affect your credit score by increasing your credit utilization ratio
Learn More: Are Interest-Free Loans Really Interest-Free?
Other credit card debt solutions
While negotiating a settlement or other agreement with your card issuer might be a good choice in some cases, it isn’t right for everyone. Here are a couple of other options that could help you get out of credit card debt.
Balance transfer card
With a balance transfer, you’ll move your credit card balance from one card to another. Some balance transfer cards come with a 0% APR introductory offer — which means you could avoid paying interest if you can repay your balance before the promotional period ends.
However, keep in mind that if you can’t pay off your card in time, you could get stuck with some hefty interest charges. If you’re considering this option, be sure to carefully read the fine print so there are no surprises down the line.
- Might be able to avoid paying interest through a 0% APR introductory period
- Some cards offer perks or rewards, such as cash back or travel points
- Could help you rebuild your credit if you keep the card open
- Typically charge a balance transfer fee from 3% to 5%
- Could be tempting to rack up a balance again
- If you need a longer period of time to pay off debt, a balance transfer card could have higher interest rates compared to other options
Check Out: Personal Loan vs. Credit Card
Personal loan debt consolidation
Another option is using a personal loan to consolidate your debt — leaving you with just one loan and payment to manage. Personal loans typically range from $600 to $100,000 or more, depending on the lender.
Additionally, these loans often have lower interest rates than credit cards, which means you might be able to save money on interest and potentially pay off your debt faster.
- Could get a lower interest rate than what you’ve been paying on credit cards, depending on your credit
- Can consolidate multiple types of debt — for example, could consolidate bills along with your credit cards
- Could have one to seven years to repay your debt, depending on the lender
- Could be hard to qualify if you don’t have good credit
- If you take out a personal loan with bad credit, you might not qualify for a better interest rate than what you’re currently paying
- Might come with fees, such as origination fees
Before you get a personal loan to consolidate credit card debt, be sure to consider as many lenders as possible to find the right loan for your situation. Credible makes this easy — you can compare your prequalified rates from our partner lenders in the table below in two minutes.
|Lender||Fixed rates||Loan amounts||Min. credit score||Loan terms (years)|
|9.95% - 35.99% APR||$2,000 to $35,000**||550||2, 3, 4, 5*|
|7.29% - 17.99% APR||$10,000 to $50,000||700||3, 4, 5, 6|
|4.99% - 35.99% APR||$5,000 to $35,000||600||2, 3, 4, 5|
|5.99% - 24.99% APR||$2,500 to $35,000||660||3, 4, 5, 6, 7|
|7.99% - 29.99% APR||$10,000 to $50,000||Not disclosed by lender||2, 3, 4, 5|
|5.99% - 24.99% APR||$5,000 to $40,000||600||2, 3, 4, 5|
|7.04% - 35.89% APR||$1,000 to $40,000||600||3, 5|
|7.99% - 35.99% APR||$2,000 to $36,500||580||2, 3, 4|
|3.99% - 19.99% APR||$5,000 to $100,000||660||2, 3, 4, 5, 6, 7
(up to 12 years for home improvement loans)
|6.99% - 19.99% APR1||$3,500 to $40,0002||660|
(TransUnion FICO®️ Score 9)
|3, 4, 5, 6, 7|
|18.0% - 35.99% APR||$1,500 to $20,000||None||2, 3, 4, 5|
|5.49% - 17.99% APR||$600 to $50,000 |
(depending on loan term)
|660||1, 2, 3, 4, 5|
|7.95% - 35.99% APR||$2,000 to $40,000||640||3, 5|
|6.99% - 22.28% APR10||$5,000 to $100,000||Does not disclose||2, 3, 4, 5, 6, 7|
|8.93% - 35.93% APR7||$1,000 to $50,000||560||3 to 5 years 8|
|5.94% - 35.97% APR||$1,000 to $50,000||560||2, 3, 5, 6|
|4.37% - 35.99% APR4||$1,000 to $50,0005||580||3 to 5 years4|
Steps to negotiate your credit card debt
If you decide to negotiate your credit card debt or opt for another strategy, follow these three steps:
1. Know your total debt
Before you talk to your creditors, be sure to gather all information regarding your outstanding debt. This way, you can be prepared to discuss your repayment or settlement options with your creditors.
Some of the information you’ll likely need includes your:
- Total outstanding balance
- Interest rate
- Minimum monthly payments
- Due date
You can estimate how much you’ll pay for a loan using our personal loan calculator below.
Enter your loan information to calculate how much you could pay
With a $ loan, you will pay $ monthly and a total of $ in interest over the life of your loan. You will pay a total of $ over the life of the loan.
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2. Choose the right option for you
How much you owe, your credit score, and what you can comfortably afford to pay are major factors in choosing the right option for handling your credit card debt.
3. Reach out to your creditors
If you’re struggling with your credit card debt, contacting your creditors to work out a plan is critical. Your creditors will appreciate knowing your situation so they can help you find the right option for your situation.
When you call, be as polite as possible, and be ready to share the solution you think would work best for you. Also keep in mind that your card issuer might not agree to the plan you initially propose — so come prepared with a backup plan just in case.
Check Out: How Do Personal Loans Work?
Help with credit card debt: Should you accept it?
There are also companies that offer help with credit card debt. However, while credit card debt can feel overwhelming, it’s important to weigh the pros and cons of seeking assistance from these companies first.
Debt settlement companies
These are typically for-profit companies that will negotiate with your creditors on your behalf to work out a payment plan. In most cases, you’ll have to pay money into an escrow-type account, which they’ll use to make payments on your behalf.
These companies also typically charge a fee if they successfully settle even a portion of your debt — usually 15% to 25% of your total debt.
Keep in mind that debt settlement companies often ask you to stop making your monthly payments during the negotiation, which can lead to fees as well as damage to your credit. Additionally, your card issuer might not even accept the settlement.
Credit counseling agencies
Unlike debt settlement companies, credit counseling agencies — such as the National Foundation for Credit Counseling — are usually not-for-profit and charge very little or even nothing at all for their services.
If you work with one of these agencies, a financial counselor will help you set up a debt management plan. You’ll then make lump payments to the agency each month, which will be sent to your creditors.
Check Out: How Personal Loans Impact Your Credit Score
Why creditors are willing to negotiate
In general, creditors want to help borrowers get back on track — especially if you’ve been a long-time customer with a good payment history thus far.
Because of this, creditors might be willing to negotiate a settlement or set up another plan instead of sending your debt to collections or pursuing other drastic measures, such as taking you to court.
If you decide to consolidate your debt with a personal loan, remember to compare as many lenders as you can to find the right loan for your needs. This is easy with Credible — you can see your prequalified rates from multiple lenders in two minutes without affecting your credit.
About Rates and Terms: Rates for personal loans provided by lenders on the Credible platform range between 3.99%-35.99% APR with terms from 12 to 84 months. Rates presented include lender discounts for enrolling in autopay and loyalty programs, where applicable. Actual rates may be different from the rates advertised and/or shown and will be based on the lender’s eligibility criteria, which include factors such as credit score, loan amount, loan term, credit usage and history, and vary based on loan purpose. The lowest rates available typically require excellent credit, and for some lenders, may be reserved for specific loan purposes and/or shorter loan terms. The origination fee charged by the lenders on our platform ranges from 0% to 8%. Each lender has their own qualification criteria with respect to their autopay and loyalty discounts (e.g., some lenders require the borrower to elect autopay prior to loan funding in order to qualify for the autopay discount). All rates are determined by the lender and must be agreed upon between the borrower and the borrower’s chosen lender. For a loan of $10,000 with a three year repayment period, an interest rate of 7.99%, a $350 origination fee and an APR of 11.51%, the borrower will receive $9,650 at the time of loan funding and will make 36 monthly payments of $313.32. Assuming all on-time payments, and full performance of all terms and conditions of the loan contract and any discount programs enrolled in included in the APR/interest rate throughout the life of the loan, the borrower will pay a total of $11,279.43. As of March 12, 2019, none of the lenders on our platform require a down payment nor do they charge any prepayment penalties.