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Settling Credit Card Debt Without A Debt Settlement Company

Struggling to repay credit card debt? Here’s how to settle your debt successfully on your own.

If you’re battling to repay a credit card debt, it can sometimes seem as if you’ll never be able to find financial security again. When debt becomes too much to handle, many people turn to a debt settlement company to help them repay their credit card provider.

However, it’s often possible to get square with your credit provider without needing to ask a debt settlement company for help. Read on to find out how.

What does it mean to “settle” credit card debt?

Settling debt doesn’t mean repaying the full amount you owe; instead, it means paying a lump sum amount that the creditor agrees to accept as full repayment for your debt. In other words, you get to wipe the slate clean and get out of debt, but you don’t have to pay the debt in full.

However, settling your credit card debts isn’t a get-out-of-jail-free card, as it can have a negative impact on your credit score.

What is a debt settlement company?

As the name suggests, a debt settlement company is a provider that works on your behalf to help you settle outstanding debt. When you engage the services of a debt settlement company, the company will assess your financial situation and help you find a range of solutions to reduce your monthly overhead and repay your debt.

Solutions they explore include:

  • Negotiating new payment arrangements with your creditors
  • Debt consolidation loans
  • Part 9 debt agreements
  • Budgeting advice and tips to help you better manage your money

Of course, debt settlement companies don’t offer their services for free, and you’ll need to make sure you can afford any fees the company charges to help you with your debt.

Can you really settle credit card debt yourself?

While debt settlement companies can provide an invaluable service to some Australians who are struggling to manage their finances, they’re not the only option available. In fact, if you’re struggling to pay down a credit card debt, it’s possible to settle the debt yourself without getting any third-party debt settlement companies involved.

By talking to your credit provider and outlining your personal financial situation, you can apply for a hardship variation. In many cases, you’ll be able to negotiate a revised payment plan that’s more suitable for you and then work towards repaying that debt at a reasonable pace.

Why settle debt yourself?

Why should you settle debt yourself rather than with the help of a debt settlement company? The most important reason is money – you can save a whole lot of it if you take charge of debt on your own instead of forking out funds to cover a debt settlement company’s fees. You should also be aware that if the debt settlement company uses its own funds to settle your account, they will become a new creditor that you need to repay.

However, if you do want to arrange a settlement with your card provider independently, it’s important to know how to go about it before contacting them. The process of working with your credit card provider to reach mutually agreeable repayment terms is known as debt negotiation, and when handled correctly it can be a win-win situation for both parties – you get to clear your debt and your creditor gets money they otherwise may not have received.

How to settle your own credit card debt

What do you need to do to settle credit card debt yourself? Follow the steps below:

  • Contact your credit provider. Call your credit card company to let them know you are experiencing financial hardship. Don’t put it off – taking action now can stop a small problem turning into a much bigger one.
  • Speak to the hardship department. Credit providers have special departments whose role it is to help customers in financial distress find a more suitable repayment arrangement.
  • Negotiate a payment plan. Work with your credit provider to negotiate a new payment plan that you can reasonably afford to service. Before you get in touch, it’s a good idea to work out an amount for which you are willing to settle – remember to keep this amount reasonable if you want a successful negotiation.
  • Draw up a budget. Work out a realistic budget to help you better manage your finances. Cutting back on your expenses will help you afford your debt repayments and put money aside for the future.
  • Repay your debt. Pay the amount necessary to settle your debt. Note that this could take the form of a lump sum amount or reduced monthly payments.

I couldn’t settle the debt on my own. What now?

If the steps above aren’t enough for you to pay off your debt in full, there are still other avenues available to help you regain control of your finances. One such option is to move your debt over to a balance transfer credit card and take advantage of the 0% p.a. introductory interest rate to pay off your debt. Some cards offer 0% p.a. on balance transfers for a period of up to 24 months.

A second alternative is to apply for a debt consolidation personal loan. These loans allow you to reduce the amount of your monthly bills and can also make it easier to manage multiple debts. However, you’ll need to make sure you can afford to repay any new loan you apply for.

The final option is to consider a part 9 debt agreement, which involves agreeing to pay a specific sum of money to your creditors in order to settle your outstanding debts. However, while a debt agreement can help you repay your debts and avoid bankruptcy, it still has serious consequences and could severely hamper your ability to access credit in future years. As such, it’s worth considering all other options before choosing the debt agreement path.

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4 Responses

  1. Default Gravatar
    MollyJuly 7, 2017

    Hi, We have 3 credit cards and about 18 months ago we contacted one of those dept help assist companies to deal on our behalf to claim financial hardship and so basically that was all good interest was frozen and we made minimal repayments, however not so long ago this dept help company has gone into receivership and we were stuck. I then contact the banks directly and we negotiated for another 6 months which is great. Basically in a few weeks we will have enough money pay them out however we were told that you can make them an offer to settle the debt and one of them have accepted around 20% off what is owing $13500 Now my question is what is recorded on the Credit File, will they listed at Default or as settled now sure where to call and ask.

    • Staff
      JonathanJuly 11, 2017Staff

      Hello Molly!

      Thanks for the inquiry! We know you’re working hard to get this all taken cared of. :)

      Debt settlement companies may declare “paid”, “settled” or “paid as agreed” on your credit file, depending on their internal procedure and differentiation. We recommend that you consult with your settlement company to verify which one they put on the file of their customers who are paying less than the actual balance.

      Hope this helps.

      Cheers,
      Jonathan

  2. Default Gravatar
    DarrenAugust 25, 2014

    If I have a credit card debt of $35k with a bank, but also have a property valued at $500k and a loan with them of $335k, can the bank do anything with the property I have if I stop paying the credit card off?

    • Staff
      ShirleyAugust 27, 2014Staff

      Hi Darren,

      Thanks for your question.

      Please check the product disclosure statement of your credit card, under the financial hardship section. It should state what the course of action is if your financial commitments can not be met.

      In most cases, your debt is transferred to a debt collector, and new payment terms can be made.

      Cheers,
      Shirley

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