Techniques for negotiating debt settlement terms
The content created by our editorial staff is objective, factual, and not influenced by our advertisers. com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site.
Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products.
Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site.
While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
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?
How to Ask Your Creditors for Help During a Hardship Resources for Single Parents Dealing with Debt. Debt Management Plans. Consolidation without a loan?
See how a debt management plan can help improve your debt situation. Learn more. Visit our blog Browse our budget guides Learn about our services. Something went wrong! There was a problem submitting your email address.
Please try again later. Thank you for Signing up! You can expect a copy in your inbox every Thursday filled with tips and money saving ideas. Find out how our debt relief programs can get you on a path to financial freedom.
Get the on debt management plans. See how this special form of debt consolidation can save you money. Let's Go. Begin online debt analysis.
See how much you can save by consolidating your debt with MMI. Take the next step. MMI is a proud member of the Financial Counseling Association of America FCAA , a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
Since , Trustpilot has received over million customer reviews for nearly , different websites and businesses. Credit Cards by Type Low APR Cards Balance Transfer Cards Secured Cards Debit Cards Cards That Are Easy to Get Search All Credit Cards. Loans Personal Loans Mortgage Loans Auto Loans Student Loans Small Business Loans Debt Consolidation Loans Search All Loans.
Loans Personal Loans Auto Loans Student Loans Small Business Loans All About Loans. Credit Cards Credit Card Guide Credit Card Reviews How to Get Your First Credit Card Credit Cards for Bad Credit All About Credit Cards. Credit Repair Credit Repair Guide Lexington Law Review CreditRepair.
com Review Dispute Credit Report How to Fix Credit How to Improve Credit Removing Collection Accounts How to Repair Your Credit How Does Credit Repair Work The Truth about Credit Repair All About Credit Repair.
Credit Score Credit Score Guide Credit Bureaus What Is a Good Credit Score? How to Start Building Credit All About Credit Scores. Personal Finance Personal Finance Guide Taxes Managing Debt Investing All About Personal Finance.
View All Blog Posts. Loans Mortgage Calculator Auto Loan Calculator Simple Loan Calculator. Credit Cards Credit Card Payoff Calculator. Personal Finance Debt-to-Income Ratio Calculator.
See All Calculators. Our Products. Log In. Sign Up. Orlando Rodriguez Orlando is a writer and content specialist for the Credit. com tea Read More 0 comments. Previous Post « Home Affordability Programs: Finding Mortgage Relief Options. Next Post Five Things Smart People Do to Build Credit in Three Months ».
Learn Your Rights Under the Fair Debt Collection Practices Act (FDCPA) Keep Detailed Communication Notes Negotiate with Creditors Directly