Debt Negotiation Self Help

If your debt is running out of control, negotiating with your creditors puts on the brakes. There is no need to pay a debt settlement company to face your creditors on your behalf. With a little patience, you can renegotiate your payment terms on your own and tackle your debt problems head-on.

Timing is Everything

To be successful at debt negotiation, timing makes all the difference. Contact your creditors as soon as you know you won't be able to make your payments. If you fail to make payments and don't communicate with your creditors, they may turn your account over to a collection agency. Once a collection agency has your account, negotiating a settlement will be more difficult.

Know Your Situation

Before you attempt to negotiate your debts, know where you stand. Make a list of all your creditors, how much you owe, your current monthly payment and your interest rate. Considering your monthly income, decide how much you can reasonably pay on each account. When you make an offer to your creditor, it is crucial that you can live up to it. If you negotiate a debt settlement and then miss payments, your settlement may become null and void, and additional fees may be assessed to your accounts.

Debt Negotiating

There are a few ways you can make your debt more manageable. The obvious solution is to lower your monthly payment. Your creditor may be willing to consider this solution, if you have a good reason why you can't meet your current minimum payment, like a job loss, salary reduction or illness. Lower payments mean it will take you longer to pay off your debt, and that it will be more expensive, since interest will add up, but it will also preserve your credit score.

If your lender won't lower your payment, ask them to reduce your interest rate. A lower interest rate will reduce your payments and will make the debt cheaper in the long rung. The downside is that the payment reduction will usually not be as great as it would if your creditor simply reduced your payments. If cash flow is a problem, a reduced interest rate may not be sufficient.

Debt Settlement

If you think you can make a one-time, lump sum payment for a portion of your debt, request a debt settlement and see if your creditor will accept that money as full payment on your account. A debt settlement will wipe away your debt, but beware of its effect on your credit. Unless you can negotiate with your creditor so that they report your account as paid in full to the credit bureaus, it will show up on your credit report as a settlement. This designation indicates that you paid off the account for less than you owed and can be as damaging as a bankruptcy.

Negotiating Best Practices

When you call your creditor, know exactly how much you can pay on your account each month. Be specific about what you want, such as a reduced payment or reduced interest rate. Stay calm and ask to speak a supervisor if you are not making any headway. Get all agreements in writing.