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# Reducing Your Debt by Negotiation - Debt Consolidation

With nearly $10,000 of unsecured credit card debt, the average American family is usually stretched to its paycheck-to-paycheck limit and beyond. Many households are only able to make the minimum monthly payment on this debt; still others are unable to do even that. At two percent of the unpaid balance, making the minimum $200 monthly payment (without any further charges added) would literally take decades to pay off. And with the advent of new legislation which makes it even tougher to file for bankruptcy, people are finding themselves caught even more tightly between the proverbial “rock and a hard place”. What can they do?

Well, if debt consolidation is out of the question (either because of credit problems or not owning a home in the first place), informed debtors might try to negotiate with their creditors for better terms. Is this really possible? It might be, depending on your credit history, interest rate, and your current balance. Simply call your credit card company and ask them if they will lower your interest rate. They may say; they may say no. You can always suggest to them that you’ve found another company with better terms. If your track record is still good with them, this may be all that’s necessary to convince them to negotiate with you so that you’ll stay a loyal, and paying, customer. If you have a history of paying late, however, they probably will not be willing to lower your rate. That’s unfortunate, since paying late was probably the catalyst which prompted them to raise your interest rate in the first place. Still, it’s worth a phone call; it certainly doesn’t hurt to ask.

If you’ve been paying your bills on time, asking for a lower interest rate may be the only option that you have. The credit card companies may not necessarily see you in such dire straits if they continue to receive your payments on time. On the other hand, if you’re late in paying, especially if you’re more than three months behind, oddly enough you may have more negotiating leverage. That leverage comes with a few strings attached, however. You may be able to negotiate a lump-sum settlement for your outstanding balance, in which the credit card company accepts a portion of your debt and writes off the rest. The settlement amount can vary, anywhere from ten- to fifty percent of the outstanding balance, depending on your interest rate, balance and payment history. This option comes with a couple of problems of its own, though. Settlement offers generally must be acted on within a matter of days or weeks, and if the lump-sum payment is not received the offer is withdrawn. It stands to reason that if you’re having trouble making the minimum payment, it’s not likely that you’ll have the cash available to settle. Additionally, the amount of your debt that gets written off is usually reported to the credit bureaus as bad debt, and that stays there for seven years.

In summary, credit card companies may or may not be willing to work out a payment plan with you, but it costs you nothing to ask them. Negotiating a settlement that’s acceptable to both parties may be cheaper and more attractive for you than consulting with a debt consolidation firm, which comes with its own set of caveats. If your credit card debt is substantial and you just can’t make the payments anymore, it’s definitely worth a try.

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