If you’re wondering whether settling credit card debt with Navy Federal Credit Union is possible, the answer is a resounding yes. And, better yet, it’s possible to do it yourself if you wish, saving money over working with an advisor or settlement expert.
Let me say, though – we worked with an advisor to settle our credit card through USAA, and had an extremely positive experience. While it cost us around $1,100, it was well worth it for what we learned about the process.
For the purposes of this post, let’s leave aside the question of whether you should settle your credit card debt, and the impact that will have on your credit as well as your future finances. I will do a post to dive into that topic in detail soon, I promise.
In our case, we needed to find a way to pay off or settle a credit card debt of $9,100 with Navy Federal Credit Union. We had struggled for several years (about 7, since my divorce) to pay off this credit card that is (stupidly, as it turned out) agreed to take on fully as part of the divorce agreement.
After working with a debt settlement advisor to settle another account, we felt that we could take on settling with Navy Federal ourselves (thereby saving the advisor’s fee, 15% of the debt reduction). In this post, we’ll share some of the things we learned during this process, as well as some resources to help you get started.
Sooner is Better – For You
Once you’ve decided that you’re going to attempt to settle a particular debt, you typically stop making payments for a period of time. Generally speaking, the bank won’t work with you to settle your account if you’re still able to make your regular payments.
So, if you’ve already made the decision to pursue settling a debt, it’s better to get started, and settled, as soon as possible. Why drag it out any longer than necessary? The sooner you can get rolling, the sooner your finances, and your credit, can start recovering.
There’s Plenty of Advice Available Online
As we worked through this process, we found several sources of information that were invaluable:
- Consumer Recovery Network has a TON of articles and information available if you want to try settling on your own. We found everything to be accurate and helpful. This is absolutely where I would start if you’re attempting to settle a debt on your own for the first time.
- Wallethub also has a guide for DIY debt settlement that we found valuable.
Timing Is Important – For the Bank
One thing we learned from the advisor was that timing is important. Navy Federal Credit Union apparently doesn’t often settle accounts prior to them being charged-off (written off of the bank’s books as uncollectible). Sometimes, however, there’s a time just before they’re charged-off that can be an ideal time to settle.
Interestingly, Navy Federal, at least in our case, played around a lot with the timing of the charge-off. It’s typically 180 days from the last regular payment, or around 6 months. However, in our case some 9 months after our last regular payment, we got a letter stating that our account would be charged-off soon, and that this would impact our credit rating. If you’re wondering when a particular account will be charged-off, you can typically call the bank and just ask. You may or may not get a straight answer, but you’ll definitely have more information than you started with.
Working Through the Process
Wow, this is scary stuff to publish online! And it hasn’t gotten any less scary…for the back story, view our previous blog about settling credit card debt with USAA. But in the spirit of sharing our mistakes as well as our successes, I’ll swallow my reservations and keep going…
From the time of the charge-off letter, it was really just a waiting game. First, we received a letter which offered a 50% settlement if paid in full, which after interest and fees came to about $4,650. We didn’t have that amount of money to put towards that card at the time, so we didn’t take any action on that letter.
We did make a few phone calls to Navy Federal during this time, essentially just keeping them up-to-date on our desire to work with them to resolve this debt, and on various financial setbacks (Don’s heart attacks/job loss, etc) that were occurring. It was a little intimidating making these phone calls – I would actually shake every time I picked up the phone to call them. However, the collections agent assigned to our account was actually very polite and professional, and I never had a negative conversation. When settlement offers were made that we couldn’t accommodate, I politely declined.
Then, we received a second letter, with a settlement offer of about 40%, or around $3,800. We didn’t have that lump sum available, either, but we did have some available to put towards the card. So, I picked up the phone (hated this part!) and called Navy Federal, explaining that their settlement offer was quite reasonable, but we just wouldn’t be able to come up with that much at one time.
After a few back-and-forth negotiations, the rep came back on the line with approval for a settlement of $3,200, or around 34%. We realized this was within our abilities, and agreed to the terms. We actually called back to make the payment the same day, and received a letter confirming the settlement within a week or two.
*There are many sources out there that say you should never make the payment until you have written confirmation of the settlement in full. In our case, we went ahead and made the payment because we had a verbal confirmation of a slight change to a written settlement offer letter, and we recorded the conversation. We were also dealing directly with the bank, rather than with a third-party collection agency, and so felt that the verbal agreement was reliable.
On To The Numbers…
Ultimately, we settled for $3,200 on a $9,350 debt (numbers rounded slightly). So our net savings was $6,150 out of $9,350, or 66% of the initial balance! If you compare to paying the balance off slowly over time, with additional interest charges, the savings is much higher.
Was It Worth It?
Now, as much as I was hesitant to pursue settling debts (I’d rather pay in full whenever humanly possible), I feel like a huge weight is lifted off my shoulders. There was definitely an emotional component to this particular debt (it was a remaining tie or remnant from my ex), so that’s a big part of it. Either way, though, I feel like we’re managing to clear the decks so we can move forward with our lives; and doing so in a way that’s collaborative with the banks so that both parties can move forward.
Resolving debts in a way that was open and honest with our creditors and ultimately led to a mutual agreement and resolution was important to us. At the end of the day, settling debts is a business decision for the bank, and they wouldn’t agree to a settlement unless it was a sound business move.
In other blog posts, we talk about why it can be necessary to make big changes to achieve your goals. In our case, one of those big changes was changing the way we approached getting rid of debt. We’re not settling all of our debt, not by a long shot; but there were some accounts where a lump-sum settlement made the most sense for everyone.
Your success in changing your life will come down to what you are, and are not, willing to do to achieve your dreams. And for many of us, that includes unburdening yourself of past mistakes, whether financial or otherwise, so that new dreams and goals can take their place. While settling credit card debt may not be for everyone, for us it was a worthy tool in the arsenal of paying off debt and fixing our finances.
Whatever you’re planning to do to pay off debt, get rid of stuff, and achieve your dreams – go do it. Now. Not tomorrow, or “one day.” Decide what direction you’re going and get started.
Have you attempted to settle credit card debt on your own? Share your successes in the comments below!