Offer a specific dollar amount that is roughly 30% of your outstanding account balance. The lender will probably counter with a higher percentage or dollar amount. If anything above 50% is suggested, consider trying to settle with a different creditor or simply put the money in savings to help pay future monthly bills.

Do credit cards accept settlements?

A credit card company might accept a settlement if you’re very delinquent on your payments. It’s often less costly for a creditor to accept a lesser amount in settlement than it is to send the account to collections, file a lawsuit, obtain a judgment, and then try to collect on the judgment.

Are there any discounts for paying off credit cards?

The savings can be significant. The SmartMoney website reports that some credit card companies and debt collectors will settle for between 20 and 75 percent of the balance. That means you could receive a discount of up to 80 percent.

What’s the best way to pay off credit card debt?

A lump-sum payment can be any amount — $10, $100, $1,000 or more — and make lump-sum payments as often as you’re able to. Do This Instead: Whenever you get a pay raise, bonus, tax refund or gift from grandma, make a lump-sum to pay off credit card debt. Make every dollar count.

How long does it take to pay off a credit card?

One typical requirement is that you must be able to pay off the debt in 60 months or less. For-profit companies offer to negotiate with your credit card company and try to get them to agree to a “settlement” to resolve your debt (typically, the “settlement” is a lump sum payment that is less than the full amount you owe).

How do you calculate a lump sum payment?

If you have multiple creditors you will also need to calculate how much to offer each of them. To do this, the formula is: (Amount owed to single creditor ÷ total debt) × Lump sum amount = Amount to offer the creditor Demonstrate your calculations to all your creditors and add this to your letter.