You might want to contact your creditors if you are having trouble paying your minimum monthly requirement. Lenders want you to pay them, so they might be willing to work with you to make your payments. They may offer to take any of the following steps:
- Reduce your interest rate.
- Stop charging interest.
- Lower your monthly obligation.
- Set up a new payment plan.
- Remove late fees.
- Forgive some of your debt.
Debt settlement is when a creditor erases some of your debt. You or a third-party company you hire will negotiate with your creditors for less debt with the promise of a lump-sum payment.
You must be able to pay the agreed-upon amount to have your debt erased.
Debt settlement companies can speak with your credit card companies about forgiving some of your balance in exchange for payment of the remaining debt.
When you work with a third party, they will set up a payment plan that you will need to follow.
Typically, you will make payments each month for three to five years. Once you have paid the agreed amount, the company forgives the rest of your debt. However, you can lose this agreement if you fail to pay each month, so make sure you can afford your liability.
Debt settlement will affect your credit score because you are not paying the full amount.
However, it is better to settle an account for less than you owe than not pay it at all. Your settled account mark will remain on your credit report for seven years.