How to Negotiate Debt Settlement On Your Own

Has every credit card application you’ve filled out lately been rejected because of poor credit? Do you often leave stores empty handed because your card is denied at the register? Perhaps it’s time to put down the plastic and pick up a phone. Your debt can be managed, and you can do it yourself.

Dealing with creditors can be intimidating. In the past, Go Banking Rates has recommended numerous strategies for repairing debt and sometimes they have involved recruiting the services of a specialist. However, paying for debt relief assistance is not always the best route to take.

In What is a Debt Settlement?, we explain, “If you decide to work with collectors  on your own to settle your debt, you will usually come out on top, paying anywhere from 20% to 75 percent of what you owe.”

Debt settlement companies, on the other hand, often charge you between 15 and 25 percent of your total debt in fees. They would have to eliminate nearly all your debt to make that deal worth it to you.

If you can accomplish something on your own, you should. The Wall Street Journal’s Karen Blumenthal recommends those struggling with debt contact creditors directly and try to work out a plan early, before their options are reduced by numerous missed payments.

For those willing to take on the task, here are some rules of do-it-yourself debt negotiation that can aid you in paying-off what you owe:

Debt Negotiation Rule #1: It Doesn’t Hurt to Ask

Dealing with debt isn’t always as arduous as you may believe. Sometimes, it’s as easy as asking your credit card company to lower your rate. With a lower APR, you can pay less in interest and contribute a larger portion of your monthly payment to the principal balance.

The same is true of debt collectors. The current recession combined with skyrocketing job losses means fewer debtors are able to pay. Liz Pulliam Weston of MSN Money writes “72% were accepting more payment arrangements, 54% were making more settlement offers and 39% had lowered the settlement amounts they would accept.”

Debt Negotiation Rule #2: Have a Plan

Before you actually speak with lenders, be aware of exactly what you can afford to pay them. Getting caught up in the wheeling and dealing of settling your debt may result in you agreeing to a payment plan that sounds good at the time, but is still not realistic for you. Debt management requires knowing exactly how much you owe, to whom you owe it and what amount you can actually afford to pay them.

Debt Negotiation Rule #3: Stay Calm

A creditor has no obligation whatsoever to accept a single penny less than what you owe. You may feel angry or upset your offer for a lesser payment is rejected, but don’t allow your emotions to get the best of you. Throwing a fit will only ensure that creditors won’t take you seriously or consider your argument for debt settlement.

Remain calm and professional and you will be addressed the same way in return.

Debt Negotiation Rule #4: Get It in Writing

A verbal agreement is not enough. If you settle your debt with a lender, have them write out the full details of your arrangement. This includes what you previously owed, the amount the creditor has agreed to accept instead as payment-in-full and how it will be noted on your credit report. Don’t send in a payment until this happens.