The Secrets to Negotiating Debt Settlement Creditors Don't Want You to Know
It’s no secret that dealing with credit card debt can be overwhelming and stressful. If you've fallen behind on your bills, your phone is probably ringing off the hook with calls from creditors and/or debt collectors. You may also be receiving calls or letters from companies claiming to be able to help reduce your balance or have seen ads on TV promising to cut your debt in half, and you're wondering, can this be true?
It might sound too good to be true, but the truth is that it is possible to convince your creditors to forgive some of your debt. And here's what most people don't know; a debt settlement company is not your only option: You can also help yourself. Here’s what you need to know about the process.
Don't wait until your account goes into collections.
You have a much better chance of negotiating a settlement if your account is delinquent (meaning you haven't paid in a few months but have not yet defaulted) than if it has already been sent to collections. Also, when a debt goes into collections, it creates a second negative comment on your credit report, on top of the original missed payments.
Build your case.
Before you try to negotiate you need to be prepared. Go over your monthly expenses. You’re going to need to explain to the creditor why you’re behind and where else your money has to go each month. If you can persuasively demonstrate that you can’t pay in full, they may be willing to accept partial payment instead of nothing.
Figure out how much you can afford to pay. Creditors expect you to pay immediately after a settlement has been negotiated. If you need to save some money in order to be able to make an offer, then wait a few months before calling to negotiate.
Don't say yes to the first offer you are presented. Keep in mind that most successful negotiations require multiple rounds of offers and counteroffers. Tell the representative if you can pay in one lump sum. Creditors prefer this to smaller payments made over time and it gives you added negotiating leverage. Ask to speak to a supervisor if your request is denied.
Remember your credit report.
Another negotiating point is what the creditor will report to the credit agencies. Ask them to delete your account after you make the payment. If they say they can't do that, ask to speak to someone who can. If they still refuse, then ask them to report the account as "satisfied in full", or at the very least, "paid" or "closed".
Get it in writing.
Once you've agreed on a settlement, don’t send any money until you receive a copy of your agreement. Ask them to fax or email you a letter stating that once you make the payment you will be absolved of any future obligation for the debt. If you've discussed the credit reporting, ask for that to be included, as well.
One Last Secret
The last week of the month is the best time to negotiate a settlement.
Collection agents often work on commissions and have quotas. If you time it right you can take advantage of this and negotiate a better deal.
Prefer to let a debt settlement company do the work for you? Learn the RIGHT way to make debt consolidation work for you.