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I Am Struggling to Pay My Capital One and Other Credit Card Debts. What Options do I Have?
Capital One is my largest creditor. I have five different Capital One cards. I have good credit and I've always paid my bills on time. This year, our household income has taken a hit due to job loss due to illness. I am only able to pay my bills by eating into my dwindling savings. What options do I have for consolidating my Capital One debt and my other credit card debt?
Thank you for your question about your Capital One credit card debt and the best solution for your debt problems. Capital One offers credit cards, home loans, and auto loans. Capital One is best known for their credit cards which they aggressively market (Samuel L. Jackson, "What's in Your Wallet?" commercials). The majority of the people who are looking for debt consolidation options for their Capital One debt are seeking help with their credit card debt.
Get Matched With a Personal Loan Lender
Bills.com makes it easy to shop for a debt consolidation loan. Start by filling in your credit score, zip code, loan purpose, and the amount of loan you need. Check out different offers and click on the appropriate ones.
When you are addressing a debt problem, a good place to start is to review steps that you can take on your own. You may already be pinching pennies, but take a look at your budget, both your income and expenses. See if you can reduce your spending and eliminate unnecessary bills. You may be able to save money by changing your phone plan, eliminating cable TV, or comparison shopping for any insurance you carry.
Use the money you generate through a revived budget to make your payments on time, eliminating or reducing the need to use your savings each month. However, at times, debt problems may be so severe that they require professional assistance to get the best results.
Contact Your Creditors
Best practices are to maintain open communication with your creditors. It is not fun, but call each creditor before you miss a payment or can only send in less than the minimum required amount. Ask if they offer a hardship program, whether one that reduces the interest rate or the size of the monthly payment. These programs are temporary but can function as a bridge if you can improve your financial picture in the near term.
Reaching out to your creditors in good faith doesn't guarantee that they will waive a late fee, not hike your interest rate, or be flexible with you, but maintaining open communication is a smart choice.
Get a Free Debt Relief Consultation Today
If you are struggling with credit card debt, contact one of Bills.com's pre-screened debt providers for a free, no-hassle debt relief quote.
A balance transfer is a possible debt consolidation solution if you have good credit. As of November 2018, there are numerous credit card offers that allow qualified customers to transfer balances at 0% interest for extended periods of time., as long as 21 months. As a rule, you can't transfer balances from one card to another card issued by the same creditor (so no transferring existing Capital One cards to a new Capital One card).
Balance transfers often have a 3% fee. It isn't a good solution unless you can pay down the debt during the low interest period. Make sure you understand the fees that come with the balance transfer and how long the low introductory rate lasts.
Capital One Debt Consolidation Loan Options
Capital One does not offer unsecured personal loans or personal lines of credit, although they do offer auto loans, refinance and purchase home loans, and business loans. If your credit is strong and you have the ability to make a monthly payment higher than the required minimum monthly credit card payments, then shop for a debt consolidation loan from another provider, such as a bank, credit union, or a peer-to-peer lender.
If Capital One or your other creditors are not willing to work with you, your best debt relief solution may be to work with a professional debt relief organization. Look into both credit counseling and debt settlement.
Capital One Credit Cards & Credit Counseling
If you enroll a Capital One account in a credit counseling's debt management program, you should expect:
- A monthly payment that is 2.00% of your account balance
- A minimum monthly payment of $15
- An interest rate of 6%. If your rate is at or below 6%, not only is there is no reduction, but your rate will be increased to the 6%. If you have a card with an interest rate below the one the DMP will put in place, you can try keeping the card out of the program, but most DMPs require you to place all of your cards into their program.
Capital One & Debt Settlement
Consider debt settlement to resolve your debt, if you are in a serious financial hardship. Debt settlement is an aggressive form of debt relief that's designed to get you out of debt in 24-48 months. For a debt settlement program to succeed, you need to make a monthly program payment, which is usually significantly smaller than your required minimum monthly payments.
You are free to negotiate directly with your creditors, if you feel you can do so successfully. However if you are not confident that you have the skills, nerve, and time to handle back and forth negotiations with multiple debt collectors, consider hiring a reputable and experienced settlement company. Only hire a settlement firm that doesn't charge up-front fees. Bills.com recommends choosing a debt settlement firm that is a member of the AFCC (American Fair Credit Council) and has debt consultants that are accredited by the IAPDA International Association of Professional Debt Arbitrators). Before hiring a debt settlement firm, review the pros and cons of debt settlement.
If you default on any of your Capital One accounts, or with any of your other creditors, and you are unable to work out a solution with them, your account(s) will end up in collections. How you are treated depends on a number of factors, including the creditors you owe, the size of your debt, whether or not you made any large purchases within a half-year of defaulting on your account.
General Collections Practices
- Most creditors first contact you from an internal collections department. If they don't succeed in collecting from you, it is likely that the creditor will refer your account to an outside collection agency or a law office for collections.
- Some creditors have in-house legal departments to collect on the debt, although that is becoming less common.
- In general, accounts are referred for legal collections after they are somewhere between six and nine months delinquent. This can vary, depending on the creditor.
- Your recent activity on your account can affect the collection process. Some creditors pay close attention to your specific account activity, when deciding whether to pursue legal collections. For instance, large recent purchases or a balance transfer to a creditor may cause a creditor to pursue collections more aggressively.
- The more time that passes without the debt being collected the likelier it is that your account will be sold to a debt collector. Creditors that are unable to collect anything after contracting with a law office usually sell the debt to a debt purchasing collection agency. This frequently happens approximately 18 to 24 months into the collection process.
Know Your Rights!
Even if sued and a judgment is obtained against you, you still have legal protections for your wages, bank account, and assets. Review the state-specific collection laws to understand what the worst-case scenario is. It is also a good idea to review the protections you have against creditor harassment.
Capital One's Collection Process and Legal Action
Here are some facts about how Capital One handle collections accounts, based on Bills.com research:
- Capital One is not known as the most aggressive creditor, but ranks in the middle of the pack.
- They begin to offer settlements when the account is in pre charge off status. Usually about 3 to 4 months after the last payment was made.
- Accounts in the Recovery Department, the last stop before an account gets sent to legal collections, may be willing to settle in full for 50%, after the account charges-off.
- Most settlements need to be paid off in full within a 90-day cycle, though settlements on very large balances may be given more time.
- An account goes to legal collections based on the customer's credit report and assets. Large balances are likelier to end up in legal collections.
- They pay close attention to recent charges made prior to any default. If you made large purchases in the six months before you defaulted, it is far likelier that your account will be sent to legal collections.
Bills Action Plan
- Keep in touch with your creditors. Let them know if you're going to miss a payment.
- Open every letter you get from a creditor. Ignoring a problem will not make it go away.
- Review each one of your debt relief options, before you decide which one is best for you.
- Check out the Bills.com's free Debt Navigator tool. The Debt Navigator allows helps easily review all your available debt options, based on the goals and priorities that you specify, giving you a realistic estimate of how long it takes to get out of debt and what your total costs will be.
Dealing with debt
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Auto loan debt was $1.607 trillion and credit card was $1.129 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
The amount of debt and debt in collections vary by state. For example, in South Dakota, 15% have any kind of debt in collections and the median debt in collections is $2323. Medical debt is common and 3% have that in collections. The median medical debt in collections is $682.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.