Negotiating with your creditors is a direct way to reduce debt payments, but it’s not easy. Remember, their job is to collect money from people who haven’t paid. They don’t care about you or your problems – they only care about the money they’re owed. How can you be successful when negotiating with them?
- Most importantly: you should be trying to uncover your creditor’s bottom line. What is the minimum they’ll accept? It varies from situation to situation, but 50-70% is not out of the question.
- Do not agree to pay more than you can afford under any circumstances. You know your own financial situation better than your creditors do, and agreeing upon a settlement package that you can’t afford puts you in a very bad position.
- Do not be intimidated. You owe money, but you still have rights. Read the Fair Debt Collection Practices Act (FDCAP). Do not let them threaten or harass you.
- If you make a request that is denied, ask to speak to a supervisor.
- Negotiating can take days or even weeks. Try not to get discouraged.
- Your creditors will usually find a lump sum payment more attractive than a payment plan. Keep this in mind when negotiating.
Finally, when you come to an agreement with your creditors, make sure that every detail is put into writing, then signed and dated by both parties.
If you are overwhelmed by debt, you may need the help of services. There are various services to reduce debt; what are they and how do you know which route is best for your personal debt situation?
Credit counseling, or debt counseling, is likely the first service you should consider to reduce your debt. They will assist you by consolidating your debt into a lower single monthly payment. This reduction in payment is usually 10-20%. Furthermore, credit counseling companies reduce your interest rates significantly, allowing you to get out of debt much quicker than you would be able to on your own. There are other side benefits, such as possibly improving your credit score.
Debt settlement companies are another service you can use to reduce your debt instantly. They help you negotiate with your creditors to agree upon a lower balance that will be counted as payment in full. This payment must be made as a lump sum. In some cases, you can negotiate directly with your creditors rather than through a company. Though debt settlement sounds attractive, be warned that there are negative aspects. Two major issues are the impact it has on your credit, and the forgiven debts are reported as taxable income.
Of course, not all credit counseling companies and debt settlement companies were created equal, so do your research.
Bankruptcy is a “last resort” option. Contact an attorney if you are interested, but be careful when considering bankruptcy. There are consequences associated with it, most notably the large negative impact on your credit.
Are you struggling with debt? Have mountains of bills? Don’t panic or feel hopeless. Here are four ways to reduce debt quickly. All it takes is a little planning and effort.
First – lower spending. Yes, it’s obvious. Try tracking your expenses for a month and see where your money is going. Are you spending too much on coffee? Cigarettes? Cell phones? By tracking each expense, you will be able to easily identify if you are spending too much in any one place – when that money could be going towards reducing your debt instead.
OK, so you’ve already stopped spending on unnecessary things. What else can you do? One option to consider is consolidating your debt. You can do this with home equity loans or line of credit, refinance and use your equity to pay off debt, or get an unsecured loan. For some, credit card balance transfer offers may be of help as well. There are downsides to these debt consolidation options, and that is that they are limited by your credit rating. If you don’t have good credit, these may not be viable.
Debt management plans are good options to reduce debt quickly, even for those with less than optimal credit ratings. Enrolling in a debt management plan can net you lower monthly payments, lower rates, and lower balances. As an added bonus, it will help improve your credit.
Negotiating with your creditors is another possibility. This is known as debt settlement, and reduces the amount of debt that you owe. That’s right, you may only have to pay 50-75% of what you owe. This option is generally only a possibility when you are several months behind on a debt. However, there are downsides. Debt settlement can hurt your credit score, and often you will need to pay off the entire debt at once. It is attractive to many, but be sure to research all implications of settling.