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- You can negotiate settlements on your debts.
- Determine if you want to use the services of a debt settlement firm or try to settle debt on your own.
- Debt settlement is not an easy process... but no pain, no gain.
What is Debt Negotiation and Settlement? Can you give me some debt settlement advice?
If you are drowning in debt, facing collection, or even facing bankruptcy, you need to address the situation now, before it gets any worse. Our debt settlement advice: debt negotiation and debt settlement are often better solutions to severe debt than bankruptcy.
What is Debt Negotiation and Settlement?
Debt negotiation, also called debt settlement, is the process of negotiating with your creditors to either establish a new payment schedule at a reduced interest rate, or a lump sum payment that’s significantly lower than the total balance. If your only other option is bankruptcy, your creditors may be willing to negotiate with you to ensure that they get something rather than nothing.
Debt Advice on How to Negotiate Your Debt
If you’re interested in debt negotiation, you can either hire a debt negotiation service to represent you to your creditors, or you can contact them on your own. If you want to try a do-it-yourself negotiation, follow this advice:
- Be calm, clear, and convincing. Explain your situation in unemotional, professional terms. Remember, they’re not required to negotiate with you, so crying or screaming is not likely to move them to help you.
- Don’t give up easily. If your creditor denies your request, explain to them why settling would be beneficial for them. Their priority is their bottom line and you must make it clear that the offer is in their best interest. If your request is still denied, do not agree to anything before you hang up the phone.
- Send a debt negotiation letter. The letter should be professional and clearly state your arguments. Send it by certified mail and keep copies of all your correspondence.
If you’re not comfortable negotiating with your creditors or don’t achieve a settlement, you can hire a credit counseling or debt settlement service. For a fee, they will negotiate for either a low lump-sum payment or a small number of monthly payments toward a reduced balance at a significantly reduced interest rate.
Although it might seem odd to pay a fee to save money, experienced debt negotiators will save you far more than the cost of their fee. They know which creditors are willing to negotiate and how much of a settlement they will accept. Due to their network of relationships, they can settle debts you couldn’t on your own. Due to their experience, a professional negotiator will not be intimidated or scared by threats a creditor can make that would freak out the average person.
Things to Remember When You Negotiate
Whether you negotiate on your own or hire a debt negotiation service, keep the following things in mind:
- The amount you can afford to pay. This should be a reasonable amount and often 40-60% of the total debt. Low-ball offers will be rejected immediately.
- Creditors aren’t required to negotiate. They often will, if the next option is bankruptcy, but don’t expect them to make it easy for you.
- Negotiation is a process. When you negotiate, you make an offer and your arguments. Expect them to make a counter-offer and counter-arguments.
- You’re negotiating with a person. If you’re friendly and professional, they will be as well. Explain your situation in personal terms without becoming emotional. Listen to their arguments and answer them clearly. Your job is to convince them to see your side. Their job is to convince you to pay more. If you both play your roles properly, you’ll reach an agreeable settlement.
Negotiating debt is difficult and scary for most people, but it can be done. If you don’t succeed on your own, hire a professional to do it for you. You can get help for your debt.
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q2 2022 was $16.15 trillion. Student loan debt was $1.59 trillion and credit card debt was $0.89 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
Collection and delinquency rates vary by state. For example, in New Mexico, 13% have student loan debt. Of those holding student loan debt, 10% are in default. Auto/retail loan delinquency rate is 6%.
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.