What is a Credit Card Debt Settlement Letter?
Before, you make yourself aware of what a debt settlement letter is, let us first discuss about credit card debt settlement in few lines. Debt Settlement can be defined as a process through which you can you payoff your debt easily. Most of the credit card users prefer to use their cards as they think that it is the easiest way to spend their money, but only 20% of the people are aware of the cons of such spending.
A credit card debt settlement letter is basically sent by you to the collection agency or the creditor. This letter is always deemed as an invitation to debt negotiation. With the help of this letter; you make an initiative towards debt repayment and tell the debtors that you are interested in repaying the debt, but you won’t be able to make a full payment and you are comfortable in making monthly payments which you can determine with the help of an EMI calculator.
Sample Letter for Credit Card Debt Settlement
Anatomy of a Good Debt Settlement letter?
Above we have discussed what is a Debt Settlement Letter and this is where we will discuss what you should be, ideally, writing in this letter. So, following are the things that you should include in the letter –
- Personal Details – First and foremost, include your personal information including your full name, full address, and contact number. Make sure in addition to these details, you have added your account number as well. You can refer to a style manual that will make you aware of the right formatting.
- Explanation of Financial Situation – Ideally, your letter should have a brief explanation of the financial situation. This will also justify the reason behind your inability to make the payment for your credit card debt. It is important to include all the supporting documents you have.
- Settlement Request – The next section will have the details of the settlement request comprising of the amount that you want to be forgiven.
- Reporting of the settlement – The last section will discuss the whole process of how the settlement will be forwarded to the credit agencies. Make sure you have requested your agency or the creditor that you have made the payment in full and negative entries should be removed from the credit file. It is imperative for the creditor to reply back in writing.
How to Write a Debt Settlement Letter? Steps & Guidelines
You are the composer of this letter and it will be sent to the company from whom you are requesting to settle the credit card debt. The collection agency or the creditor should have some part of the debt amount than nothing and this is the reason this letter will work pretty fine.
Well, many times the part of getting your finances back can be quite tricky. But, you don’t need to worry as you can find numerous debt settlement companies offering their expertise in this process. These companies have years of experience and they have contacts with the creditors and they are proficient enough to get the attractive settlement deals. Such relationships, with the creditors, can prove helpful in getting positive results from the debt settlement letter.
The letter will have specific information that will include your personal details, account details, credit card balance, the amount you have proposed to be settled, and the date on which the settlement will be finally paid. The debt settlement letter comes with certain steps and guidelines –
Paragraph 1 – This paragraph will explain to the credit card company that you are interested in settling the debt.
Paragraph 2 – You can provide a synopsis explaining the reason behind the settling of the debt, it can be – illness, income loss, unexpected expenses, and family hardship, etc. Since, you have already have missed payments in the past, so the company won’t mind having some money from your side.
Paragraph 3 – In this paragraph you should share, with the company, the amount you can comfortably afford to pay on a monthly basis and from when should start making the payments.
Paragraph 4 – With this paragraph, you will end your letter. You will write that you are hopeful that the payment plan and other things get accepted. Ask the company to send a letter of an agreement if they agree to the terms of your repayment.
How a Credit debt settlement letter prove helpful?
There are so many reasons due to which you can go deeper in the debt and there are some reasons you just can’t control. You might be having home repairs, unexpected medical expenses, and other emergencies where you have no choice but to face the debt. But, in an effort to get out of the debt, you must have explored different financial websites/blogs, unfortunately, you come across various websites having bogus and misleading information. So, if you are seeking correct and authentic information, then you have made a right pit stop.
Are you aware of the key tips of Credit Card Negotiation?
- Make sure you are polite but at the same time, you need to be firm. If you don’t like any settlement then make sure you have refused it.
- Documenting everything is the key. It is important you have maintained the copies and the records such as telephone calls.
- Ensure that the debt has reported as paid in full to the credit bureaus. You can assure this by checking the report.
- When you make a payment, use only certified check or a money order. Make sure you have avoided giving a direct debit, as this will give the creditors access to your bank account.
- It is important you have first received a written confirmation from the lender or the agency, then only it makes sense to send the payment.
What are the reasons behind writing a Debt Settlement Letter?
Probabilities are that you might be using more than one credit card. Sooner or later, you find yourself sinking in the credit card debt and this is the time when you decide that writing a Debt Settlement Letter is the best option that seems perfect at this moment. When you are unable to keep up with the payments, the rising payments just gets onto your nerves and this usually happens.
This is when writing a Debt Settlement letter becomes important. Below-discussed points help in explaining the reasons as why such letter should be written –
- Whatever you do, don’t get intimidated by your decision of writing a debt settlement letter because you have the capability of taking yourself out of this ordeal by taking an action. There is a fair bit of chance that the creditors may not accept your offer and offer you an amount, of theirs, that they want you to negotiate upon. Depending on your financial condition, it is totally up to you whether to consider or to decline creditor’s offer.
- Like already mentioned, a credit card debt settlement letter is written to the creditor when you have a high credit balance and you are willing to settle the debt. This letter can be considered as a great option as most of the times, it really works in the favor of the borrower to clear up his/her credit card balance.
- Every credit card company wants to make money. If you are not in a position to pay off your balances, then the company is not earning any profit from you. If you agree to write a debt settlement letter and agreeing to pay some share of the balance, most of the times these companies choose to negotiate to get some amount instead of nothing at all.
What are the key considerations by a collection agency while receiving a debt settlement letter?
The first thing that comes to the mind of a debt collection agency, after receiving your letter, is that there must have been some hidden inspirations owing to which you have forwarded the letter. These inspirations can be buying a new car, qualifying for an apartment, buying a home, or maintaining security clearances, etc.
Seeing these collection ratios, debt collectors must increase their collections from all those consumers whom they have the rust of paying back no matter what the situation is. If they think that that they are standing in the way of something you should have, they will try to be less negotiable.
Dont’s of writing a Debt Settlement Letter
If you really want to get rid of your debt, it is imperative you are familiar with all the things you don’t want to write in the letter.
- Before you have received the approval from your creditors, make sure you have not have revealed your saving account details in the letter. If they get to know the amount of funds you have on hand, your letter will be rejected by the creditors in order to cut back the settlement amount.
- You should not overstate the financial hardship you are undergoing. Make sure you have not used this method in order to gain sympathy as your creditor will get to know the truth anyway. So, make sure you are honest.
- No matter what, you should avoid using threatening language in your letter. This will only reduce your chances of getting your letter approved by the creditor. You won’t be able to reduce your debt and moreover, this will affect your credit rating as well. If still you go ahead and use foul language, your creditors will not make any changes to the negative items in your credit report.
- Lastly, while you are proposing the amount, ensure that you are not asking more than your financial ability. Don’t put yourself in a dicey situation where you haven’t evaluated your financial standing carefully. In the worst situation, if you are not able to make the proposed payment, you may have to face legal charges.
Credit Card Settlement Letter Myths
Most of the people have heard about the Credit Card Settlement Letter and they have little information or myths about the letter. So, let us debunk the common myths related to this letter –
Getting it on the creditor’s letterhead
Most of the people think that the agreement can be documented on their letterhead as well, but this is practiced only by the inexperienced negotiators. Ideally, the correct method is that the creditor or the collection agency has used his own letterhead. This is the method used by all the professional negotiation companies and agencies.
No need for letter and no deal
Most of the times, the lender will say that you don’t need any letter from their side as they have recorded on tape. Frankly, this is nonsense. If some problem arises in the future, the main question that arises is how will you get the copy of that tap? In order to get the recording, you will have to go through the legal process. So, this is where having a debt settlement letter will come handy.
Fax copies can work
Most of the letters are forwarded via fax and there is no issue in documenting the whole transaction. This fax system works just fine and lot of consumers have done it successfully. There is not even one single instance where the user has faced an issue.
It can be concluded here that no matter how worse is your financial situation, make sure you have kept your cool. While writing a Credit Card Settlement letter, make sure you have written the letter in a professional manner as this will show your attitude towards the debt.