Unpaid credit card debt can hang over your head like a weight always ready to fall. Between collections phone calls, hits to your credit score, and interest that keeps piling on and adding to the principal balance, credit cards with large debts can feel impossible and overwhelming. The longer you carry the debt problems, the worse it all gets.
The good news is that there are ways to get under from under a looming debt from the credit card company and even have it removed from your credit report. In this article, we’ll be talking about how to resolve a Capital One credit card debt.
What is Debt Settlement?
Debt settlement is a negotiation between a borrower and a lender. This negotiation often allows the borrower to pay off only part of their overall debt.
Most debt settlements end with an agreement for the borrower to pay a lump sum all at once, and in exchange, the lender forgives the remainder of the debt. There are also some cases when a lender may agree to a hardship plan where they spread out the payoff amount over a number of months or years, but these are much rarer than a lump sum payoff.
The whole point of the lender forgiving some of the debt is that the rest of the debt is paid off all at once. They’d rather get some of the money than none at all. Capital One is a lender who sometimes allows a debt management plan for debt settlement, so this could be an option depending on your circumstances.
Steps to Settle a Capital One Credit Card Debt
Understand Your Finances
Before you start the debt settlement process, it’s important that you get a handle on your overall finances. If you’re having trouble paying off your credit card payments, chances are, finances are tight. Even with a bare-bones budget, you’ll have to find a way to put money aside for a lump sum payout.
Review your income and expenses in detail. Not only will this help you to determine where you can find the money to stash away for the payoff, but the lender may ask for information about your personal finances during the negotiations process.
This next step in preparing for the settlement may sound counterintuitive, but it’s vitally important. Stop making payments on the debt. Yes, this will hurt your credit score. It may hurt your credit score a lot. It also means you’ll incur late fees and possibly other punitive charges, which will add to the overall debt.
As bad as this is, credit card issuers will not consider borrowers eligible for a debt settlement until they’ve been delinquent on the account for some time.
With Capital One, an account will not go into default until you’ve missed payments for 180 days, so debt settlement will not be possible before then. This may be one of the only times you don’t want to make the minimum monthly payments. Of course, once a settlement is reached, and the debt is paid off, you’ll need to go into serious credit repair mode.
Determine How Much You Can Pay for the Debt Settlement
Most debt settlements require the borrower to pay a lump sum of anywhere between 10 to 50% of the total debt. The exact figure will depend on your unique circumstances. After reviewing your finances, you should know how much you could save up and part with to get this debt off your hands.
Something to think about after the debt settlement is reached and your remaining balance is paid off: if you struggled to repay your debt due to a difficult life event, such as a job loss, then you may be able to have the debt removed from your credit report by writing Capital One a letter requesting a Goodwill alteration.
Contact Capital One or the Collection Agency
Whether you’ll be speaking to Capital One or a third-party collections agency will depend on the state of your account. Capital One does most of its debt collections itself. However, like all lenders, they do sometimes sell debts.
You will know if your debt has been sold if the status of your account is listed as a “charge off.” This means you can no longer negotiate with Capital One. Instead, they’ve given the debt to a third party as a collection account, to who you’ll need to speak to. If you account lands at one of the collection agencies, not all is lost. You’ll need to establish communication to see how you can work down your debt.
After you figure out who you need to contact, reach out and explain that you’d like to talk to them about debt settlement. They’ll tell you the next steps and work with you to pin down the terms. Many borrowers have had good experiences negotiating debt settlements when dealing directly with Capital One.
Negotiating the Debt Settlement
The first thing you’ll want to do is explain your situation. Be honest about the financial hardship you’ve faced. Explain that you don’t have the means to pay off the full debt and aren’t likely to have the means to pay it off anytime in the near future, but you’d like to reach a deal that helps both parties: you want to clear this debt, and they want to get some of the money owed. Engage in an honest and direct conversation about your limitations and what you’re prepared to pay in a lump sum.
You’ll want to consider all your negotiating options to negotiate for the best deal. For example, you can represent yourself in the debt settlement or hire a debt settlement agency. If you go with the former option, be sure to go in prepared and have all of the information you might need regarding the debt and your personal finances.
If you choose the latter option, consider both the pros and cons. debt settlement companies will have more experience in settling debts and may know which strategies are best to employ. On the other hand, you’ll likely need to pay a hefty fee to have them settle your debt for you.
It’s also important to take your time in selecting the right debt settlement company. While there are plenty of reputable companies, there are also a lot of scammers and companies that aren’t worth the money. Do your research and carefully and speak to a credit counselor before going this route.
Get Everything in Writing
When you reach an agreement with the lender, get the terms of the debt settlement in writing, especially before making any payment. Getting the terms in writing means there’s less chance of misunderstanding or anything falling through the cracks. This is particularly important if you do a good deal of negotiating over the phone. This leaves too much room for human error. The agent you spoke with could forget exactly what was said. By getting the terms in writing, you’re protecting yourself.
Removing the debt from your credit report
As we covered earlier, a Goodwill letter can be sent to the lender to ask them to remove the debt. This can only be done once the debt has been paid off.
However, you can also have the debt removed from your credit report as part of the debt settlement agreement. Often this will come with a ‘pay to delete’ fee. If you can negotiate this, be sure to get it in writing, as with all the other terms of the agreement.
In the end, you may need to just wait it out. After a few years, the debt won’t show up on your credit report anymore. While waiting for that to happen, you can raise your credit score in other ways, like paying all of your credit card bills on time or using a secured credit card that reports to all three major credit bureaus.
Wrapping It Up
You may feel overwhelmed and hopeless if you have debts that you can’t afford to pay, but debt settlement is one option that may be available to you. Start by reviewing your finances and stashing away money for a lump sum payoff. Capital One is one of several credit card companies that often does debt collections themselves, but your debt may also be sold to a third-party. Who you negotiate your debt settlement with will depend on who currently owns your debt.
You can negotiate a debt settlement yourself or payment plan. A good option is to hire a debt settlement company to do so on your behalf. Be careful if you go with one of these companies, and always do your research before hiring one. Consider whether you really need them and whether it will be worth the hefty fee.
Once you have a deal in place, get everything in writing. You don’t want a misunderstanding sometime in the future hurting your debt relief goals.
Debt isn’t the end of the world, and there is a way out. If you owe a debt to Capital One, reach out to them or the collections agency and see what can be done. There’s a good chance that your lender wants to settle this debt just as much as you do.