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If you have considerable high-interest debt and a lower credit score, it can make the repayment process seem nearly impossible. However, for some, learning how to negotiate your debt settlement could be what it takes to get back on the right financial footing.
Negotiating to reduce your debt in a settlement agreement can help alleviate some of your financial burden and help you avoid bankruptcy. When you pursue a debt settlement, you negotiate with your creditors to reduce the total amount you owe.
Here are some things to consider before you pursue a debt settlement:. Knowledge is power and the more you know about the process, the more likely you are to end up with a favorable settlement. Go into the process understanding every aspect of your financial situation, down to the penny.
credit reports. Keep in mind that most states have a statute of limitations that dictates how long a debt collector can pursue you for overdue debt. Before calling, take a look at your budget and savings to determine if you can make a lump-sum payment up front. Once you have a plan laid out, you can then make your offer and establish your potential terms.
Always make an offer that is less than the full amount you can afford. This leaves room for negotiation. Depending on how much you owe, it may take months or even years to save up enough to make your lump-sum payment.
If possible, keep making at least the minimum payments to avoid accruing more late fees and interest charges. While debt settlement agencies often require you to stop making payments to your creditors, if you negotiate for yourself you may be able to continue making the minimum payment.
Spend some time beforehand thinking of a payment plan that would work for you in the event this comes up. If your creditor or a debt collector has been calling you, start the negotiation by picking up the phone when it rings.
They will likely ask for payment in full, but be ready with your counter-offer for a lesser amount. It could take multiple phone calls to reach an agreement. If your creditor accepts your settlement offer, you might be pressured to provide your bank account information immediately.
You do not have to share this information. The letter should detail the settlement amount and add that the creditor agreed to accept the amount as payment in full for the debt.
This is important to improve your credit score faster. Send the letter via mail and request a return receipt, so you know your creditor received it. As always make a copy for your records to ensure you have a paper trail.
Follow through on the terms of the debt settlement and make your payment by the agreed-upon date. Make sure you understand exactly how to deliver the funds to your creditor well before the due date to avoid any issues. Make a debt settlement offer to the creditor Once you think you have enough money saved up to settle an account, you can call your creditor and make an offer.
Review a written debt settlement agreement A company representative could offer you a great deal over the phone, but you want to have an official offer in writing. Ways Debt Settlement Might Not Work Settlement can save you a lot of money, but it's not a guarantee. Your credit can take hit.
Whether you choose a DIY route or work with a debt settlement company, the process could hurt your credit and open you up to the possibility of getting sued.
You may not be delinquent enough. You may need to be at least 90 or more days behind on your payments before a credit card company will even consider a settlement. By that point, your late payments have likely been reported to the credit bureaus.
It may take a long time to complete the settlement. You may be sued. Additionally, creditors may be able to sue you for unpaid debts and get a judgment, which could lead to wage garnishments. Recommended Articles How to Use Charity Care Programs to Reduce Your Hospital Bills What Happens If You Miss a Bankruptcy Payment?
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