I have a bit of a unique situation here for which I could use some experienced advice. I owe about $14,000 across 4 credit card accounts. All of them are old debt, with nothing charged since about 2004. I'm current with all payments, paying over the minimum amount. I have the opportunity now to pay everything off in one shot. I was hoping to negotiate with the creditors, to perhaps bargain the balances down. After speaking to someone at credit solutions, I was advised to use their services for 3-4 months. Apparently, no payments would be made to the creditors during that time. Then, as he says, the CC companies would be more willing to negotiate a lower payment on my balances. The fee for their Credit Solutions services would be about $2,000. My question: Is there some real benefit to using these companies, rather than just doing the same thing yourself? He states CS would most likely be able to keep negative statements from appearing on my credit reports. Is this true? Anyone have any experience in this vein? Any advice is appreciated.
I seriously doubt that they can keep negative statements from appearing on your credit report. You probably won't be able to negotiate balances down if you're current. First of all, save the $2K. Either use it toward paying off the debt or have a nice vacation, or just put it away for emergencies so you won't have to run up your accounts again. As I see it, you have two choices. Pay the cards off and keep your credit good. Or don't pay for several months and see if you can negotiate for lower balances. With the second scenario, be prepared to have bad credit for a while, so if you need to make a major purchase in the near future consider that. I have heard that a few companies are negotiating on current debt, but they may also close the account or lower you limit. Of course, it never hurts to ask.
Paying off the cards over time (one with a 29% interest rate) doesn't seem like a good option to me. Yes, I was late with one payment and up went the rate. I was hoping to transfer everything to a zero-rate account and pay it down, but I can't find one willing to accept the entire debt amount. So, stop paying for 3-4 months and then approach them with a complete settlement offer?
Why not pay off the 29% card as quickly as possible. Pay only minimums on the other cards and put as much as you can on that card. Then maybe you'll be able to get something with a lower rate to consolidate your other cards. Once you get the one paid off and start putting all that you were paying on that one to the next highest interest card, you'll be surprised how fast it will go down. If you really can pay, stopping payment and ruining your credit for seven years hardly seems worth it to me.
Well remember Hedwig, that I have enough cash on hand to pay off the entire amount on all cards, about $14,000. I was hoping however, to negotiate on the amounts owed because I was willing to make a lump sum payment. Am I being unreasonable? Should I just pay off all the balances, without negotiation?
It all depends on what you value more: your credit rating or your cash balance. If it were me, I'd pay the balance and not try any fancy stuff and here's why (having been in a similar crossroads myself). If you pay the balances off as they are, you'll boost your credit rating and in a few months (3-6, perhaps) be able to get a better credit card for future purposes. You'll be out whatever cash you might think you can negotiate down to, but you'll be free and clear AND have the option for future credit at a reasonable rate. If you try to save a few dollars, you'll pay for it for the next several years with bad credit which means a higher interest should you want to buy anything on credt during that time. But let's look at what's certain: 1) you'll have multiple months of late payments with some reporting 90-120 days late. These will be on your credit report for the next 7 years, although their impact will be greatest for the next 2-4 years. 2) whatever cards you keep (i.e. that you or they don't close) will have a 29% or higher interest rate for some time to come (figure 2-4 years but it's hard to say). 3) You don't say what banks these accounts are with so it's possible some will sue you before you get a chance to negotiate. The cost of defending (and then losing) a lawsuit on just one card would negate any savings you might be able to gain on the others. 4) even though you pay off the cards, once they go into collections, some debts will keep coming back to haunt you EVEN AFTER YOU HAVE PAID THEM! 5) some of the other side effects of bad credit include higher home and auto insurance, inability to get certain jobs, etc. So it all comes down to what's important to you and where you expect to be, financially, in the next 5 years.
Well, yes you are - so to speak. You used their money and the have an expectation that you are going to pay it back. If you follow credit solutions method your credit score will tank even further than it is now. And, you might even get sued. If you call your creditors and negotiate a reduction in principal for the money now, they more than likely will report it as "Settled for less than full" which is a score killer too. Pay it off and be debt free.
As long as you are paying, they really shouldn't have any fear that you won't continue to pay. If you stop paying, they will change you to the "default rate" and hit you with late fees, and perhaps overlimit fees and other fees. After six months of this, what you owe will be considerably greater than it is now. This number might be "negotiated" but it's unlikely that it will go down much more than what you could just pay today. If you continue to fight them, it is very possible they, or someone they sell the debt to, will sue you. In all this, your credit rating will be ruined. It is interesting that you are apparently being told by debt consolidation firms (or whatever they style themselves now as) to not pay your legitimate bills and instead pay them $2000. Perhaps some state AG should look into those shenanigans as they have recently with the arbitration games.
I agree. But 29% interest on an 11 year debt with no new charges, well, I feel as if they've profited enough. I'm convinced that paying the amounts in full is the best option. Thanks, all.
