A credit card is what lets you spend an amount of money more than what you owe, with an obligation to repay the credit in the near future. People get attracted to using credit cards because of their advantages, like incidental rewards, bonuses, cashback, ease of use and discounts. But, one must use the credit card judiciously, as failing to repay the credit card bills in full on time can lead to an unavoidable debt trap. Also, considering the interest rates companies charge on credit card dues, the debt keeps on doubling every two months. If the debt burden is taking a toll on you, and you find it difficult to repay the loan amount, then you can opt for credit card settlement as a last resort. Wondering what credit card settlement is or how it works? Keep scrolling through to know the in-depth details regarding credit card settlement procedure in India:
What is Credit Card Settlement?
Credit card settlement is a type of debt settlement under which there is a mutual agreement to pay off the amount less than what you owe. The agreement occurs between the credit card issuer and the borrower. Under this contract, the borrower promises to pay a certain agreed amount in just a single payment. The lenders usually forgive a specific portion of the debt owed by the borrower if they promise to pay back a lump sum amount without fail.
The lender usually does consider credit card settlement as the last option to retrieve whatever amount they can. This settlement option is considered in extreme cases where the borrower’s financial condition becomes dumpy because of the reckless spending habit of the borrower or under any emergencies. The settlement percentage depends upon the borrower’s negotiation power or their debt settlement company and the borrower’s financial condition.
How Does Credit Card Debt Settlement Process in India Work?
Credit card companies advertise credit card settlement as the process to eliminate the pending debt for pennies. However, the process of settlement is not as straightforward as it looks. Here is the credit card debt settlement procedure in India:
- Approach your credit card lender and explain your financial situation to give them a clear view of your inability to repay the amount you owe. Express to them that you are open to negotiating the amount. Stay prepared to tail with multiple officials as the lender doesn’t easily entertain the request for debt settlement.
- Make a formal, written request to keep proof. In the letter, you must explain the reason behind your inability to pay off the debt in full and should also mention the amount that you can pay off in single instalments.
- The acceptance or rejection of the request solely depends upon the lender’s discretion.
- In case of acceptance of the request, the lender will propose a repayment plan for the credit card settlement.
- The lender solely has the right to decide the settlement amount based on the financial condition and the payment terms.
Credit card settlement reflects the fact that you cannot manage your debts easily and effectively. It can adversely dent your CIBIL score, which further reduces your chances of availing loan in the near future. Below mentioned are a few ways via which you can avoid landing into a debt settlement situation:
- Don’t opt to pay the minimum amount. Always clear the credit card bills at the end of each billing cycle.
- Avoid overspending, and limit your spending to 25-30% of your credit card limit since you have to repay the amount.
- Ask your lender to set auto payment methods for your credit card bills.
- Don’t wait for the last time to pay back the dues. Else, pay in advance to rule out the possibility of interest charges.
- Request your lender to convert huge outstanding debts into monthly instalments.
Credit cards are valuable financial assets that must always be used with financial discipline. Failure to do so can affect you adversely. Under these debt trap situations, you can always rely on a debt relief company.
FREED is India’s 1st debt relief platform that lets you stay stress-free during uncertain financial times. It not only helps you save extra bucks but also helps you to save time and effort in negotiation. The experienced team will help you to stay free from the financial burden. Download FREED to enjoy hassle-free credit card settlement process in India.