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How Does Credit Balance Negotiation Work?

Eric Rosenberg
Written by Eric Rosenberg

If you find yourself with so much debt you can’t keep up, you have a few options to move forward. While some debtors rush to declare bankruptcy, credit balance negotiations may be a better option. Negotiating your credit balance offers some pros and cons. Read on to find out when you should consider credit balance negotiation and how credit balance negotiations work.

What are credit balance negotiations?

Credit balance negotiations are a method some people use to lower their debt. If you have so much debt that you can’t make minimum payments and see no path to debt freedom, it’s time to consider credit balance negotiation.

In a credit balance negotiation, the debtor is asking the credit card company to accept a lower payment for all debt now rather than wait and hope for a full payment later on. This is often referred to as a debt settlement. In other cases, the creditor may be willing to lower your debt or freeze your balance in exchange for your getting on a repayment plan.

In some cases, the creditor will offer a forbearance, which is a temporary pause of all payments to give you time to get back on track. Some creditors may be willing to freeze your balance during this period and not charge additional interest, while others will allow you to skip payments while your balance continues to grow due to compound interest.

To reach a debt settlement, the borrower must be ready to pay off a portion of the debt today while the remainder is discharged. If the debtor can afford to make a one-time payment, one that is lower than the total balance but still a significant portion of the total debt, to make the entire credit card balance go away, a debt settlement may make sense.

About the author

Eric Rosenberg

Eric Rosenberg

Eric Rosenberg is a finance, travel, and technology writer originally from Denver, Colorado living in Ventura, California. When away from the keyboard, Eric he enjoys exploring the world, flying small airplanes, discovering new craft beers, and spending time with his wife and baby girl. You can connect with him at his own finance blog Personal Profitability.

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