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3 Huge Tips to Reduce Credit Card Debt |
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On the positive side, be aware that your creditors would rather get *something* from you than nothing, so keep that in mind as you negotiate. Most will not sue you recover money and most will be willing to work with you to achieve a settlement. Keep in mind however that their goal is to recover as much money from your as possible and with that objective in mind, they will use many methods to make that happen.
*Disclaimer*
Please know that these tips listed here are generalities and are
only suggestions. Each situation is different - you may
encounter circumstances that are not covered here and using
these tips in no way guarantees a successful settlement.
First Things First
Be aware that to even begin negotiation, your debt must be past due. No one will even think about negotiating settlements with you if you are current with your payments. Most likely, you're already behind and are ready to start approaching your creditors. If you're current with your payments, you'll have to be at least 3 months late to begin settlement negotiations.
Know Your Creditor
Whether you're dealing with a credit card company or a collection agency, the key to do it yourself debt settlement is to know who you're negotiating with. Each creditor and collection agency has different policies and settlement limits, (or lack thereof) so unless you or someone you know has settled with your particular entity before, you are walking on new ground.
Be aware that in general, credit card companies may have a little more patience with you up front than a collection agency. If you keep in touch with them, explain your situation, and why you can't pay, they should be willing to negotiate a settlement with you after they determine you really can't pay. Perhaps 4-5 months after you're late.
In general, you should ask for a settlement that is 40-50% of the balance you owe. This is where a professional settlement company will really shine - they generally know the creditor's limits and can get you the best settlement.
If your delinquent account has been passed to a collection agency, your room to negotiate may be a little smaller. They can sometimes be little more hard-line and will not want to negotiate much. However, their initial offer may be lower than the credit card company's, so it may be beneficial to hold out until your account goes to collections - especially if you don't have much money to settle with.
Negotiate a Win-Win Agreement
Remember - the creditor needs to feel like they are getting something. You won't get significant debt relief for nothing, so give them something back (if you can afford it) for the money they lent you. Don't ask for a .10 cents on the dollar settlement - most will laugh at you and hang up.
Frequently mention that you "don't want to declare bankruptcy" but if you can't get this debt out of the way you will have to consider it.
Creditors will also do research on you - they will have your credit report in their hand when they are talking to you - they may also ask you to explain some items on your report. Be prepared with answer to explain each entry, especially ones that make you look like you have money, ex. boat loans, expensive house, etc. Negative entries on your report will help you in negotiating.
Be Polite and Contrite
Approach each conversation with a positive attitude, but also convey a bit of guilt that you're even in this situation. Be apologetic, but not too much. Keep phrases like this in mind as you speak:
"I wish I could
pay it all, but I just don't have the resources."
"I have relative in mind that I will ask to borrow money from."
"I think I can get $XXXX from my Aunt Betty in 2 weeks, will
that sufficient to settle my account?"
Creditors will be looking for a reason that you cannot pay. Be truthful.
"I lost my job 2
months ago and I just don't have anything - I'm barely making my
mortgage payment."
"My <insert relative> got sick and the medical bills are
enormous. "
Be Patient
It may take week or even a few months of going back and forth to reach a mutually beneficial settlement. If they're settlement offer is too high in your mind - ask for time to review your finances and ask your family for money. If they reject your offer - they may come back in a few days or weeks with another.
Don't Be Greedy
Remember - the creditor needs their money back. So they will only go as low as they feel that you are worth. Timing is everything in do it yourself debt settlement, so you may want to take the first or second offer that comes along. Beware, if you reject too many offers or appear like you are not flexible, you will not get a settlement and you might be looking at a lawsuit. Don't hold out too long.
Get it in Writing
When you've got an offer that seems reasonable, make sure you get the offer in writing first. See my settlements for official settlement offers that I received from my creditors. These are real sample settlement letters with which I settled my credit card accounts. Use them to compare with yours. Be sure that every item that was agreed on verbally is written in the letter.
Seal the Deal
Make your payment according to their terms. They will usually require a partial settlement in a matter of days, then give you more time, sometimes up to a month or more to complete the settlement. Most will accept an electronic payment over the phone or send it certified mail to ensure it gets there on time.
Hopefully these tips will help you do it yourself and get a good settlement.
If all this seems too daunting for you, yet you still don't want to hire a reliable debt settlement company, there's another option. Zipdebt has some great information that will help do-it yourselfers get the best settlement.
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Did You Know... |
49% of adults, and 66% of US high school students got F's on a national test on their knowledge of basic economic principles.
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Food for Thought... |
"I'd rather go to bed without supper than rise in debt."
-Ben Franklin.
