Negotiating debt settlement can be intimidating, especially if you have been dealing with the fear tactics employed by aggressive collection agencies.
While you can enlist the help of professional debt settlement services, doing it yourself is really not that difficult if you follow a few helpful tips.
If your bills are piling up and you find that you are unable to make even the minimum payments required, then you can contact your creditors and negotiate an agreement to pay less than you owe.
Since hiring collection agencies or engaging in legal proceedings can be both costly and time consuming, creditors know that it is in their best interest to consider your offer. They know that if they are not willing to negotiate, you may be forced to take more extreme action, such as bankruptcy.
They would much rather agree to a partial payoff than risk receiving nothing at all. If you explain your situation and present a reasonable proposal, creditors will likely accept what you are able to offer.
If you are unable to make the payments on your credit card then you need to close the account so that you can negotiate a payment plan with the credit card company. Since you will not be incurring any further debt, your credit card debt essentially becomes a loan. Creditors are often willing to reduce the principal balance by up to 50% if it means they will get a least a partial repayment.
Unfortunately, many people neglect to make their credit card payments but do not inform the companies or attempt to contact them to make alternate arrangements. In this case, collection agencies are hired or legal action is taken which costs credit card companies time and money.
Creditors will appreciate hearing from you and are more likely to respect the difficulty of your circumstances if they know that you are making an effort when negotiating debt settlement.
About 18 months ago I opened a line of credit with a major bank here in the United States. I was pretty happy at the time, because I wanted to purchase a spinning bike for my basement work out room. I still recall the day I purchased the bike and assembled it. It was very cool and very sleek!
After about two months of payments of $55, I fell on the ice and snow and fractured my leg. I was unable to work for several months. During this time, my income was very limited. I started to struggle to make some payments, including the payment on my spinning bike.
I contacted the customer service line at the bank, and explained my situation. They were unable to assist me because I had opted to decline the insurance that would kick in if I became unemployed or unable to make payments on a regular basis. I felt awful. By the end of the conversation with the customer service agent, Isaac, they had agreed to waive two late charges of $30 each, that were currently on my account. This was very helpful, in the short term.
I also got Isaac to lower my monthly payment for the long term, by $19, which nearly cut my monthly payment in half, even though it did extend the loan. I anticipate that once I am back on my feet, literally, I will re-negotiate with the bank to get back on track and get this bike paid off. The next loan I take out, I will certainly opt in for the insurance.
Posted by: Gina
You can contact creditors by telephone; however, it is important that you document the conversation, including the date, time, and name of the person with whom you spoke. Make sure you follow up any verbal agreement with a written letter of confirmation. Keep a copy of any correspondence for your files so that everything is documented and can be verified.
Inform your creditors that you are unable to continue making the minimum payments and request closure of your account. Ask that they contact you to discuss negotiating debt settlement to set up an alternate payment plan. Remember to include you account number and any pertinent contact information.
I regret to inform you that I can no longer afford to make my minimum payments of $x per month on my credit card account with you (account number #####).
I would like to request the closure of my account, followed by the payment of the debt on a payment plan.
Please advise what kind of terms I could expect from such a plan.
Very truly yours, etc.
As with any debt relief program, negotiating a settlement will damage your credit report; however, it may be possible to negotiate to what extent these agreements will impact your credit rating.
If you are able to pay a large portion of your debt, especially in a lump sum pay off, then creditors may agree to report the loan or debt as ‘paid in full’ or ‘paid to their satisfaction’ rather than recording it as a negotiated or reduced settlement.
Before undergoing any debt settlement programs you need to understand how your credit report will be affected and realize that you may be unable to obtain additional credit in the near future.
Engaging in your own debt settlement negotiations can be time consuming and even intimidating. However, by following a few practical tips, you may be surprised at how willing your creditors are to work out an agreement.
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