The most significant aspect of any business that involves money is that everything in it is negotiable. The terms and conditions, the price and business policies may be written in stone but more often than not getting a discount is not an impossible task. All you have to know is whom and how to ask for it. This is the art of negotiation which you should master when you go for debt settlement as well.
When you owe money on your credit cards or any other loan for that matter, you will be surprised to know that the opportunity to negotiate with your creditors is actually as great as the amount you owe. You will need a little bit of guts and knowledge and get your balances cut even by half or even more through proper Guide For Debt Settlement Negotiations.
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A Simple Guide For Debt Settlement Negotiations
Starting with the basics of debt settlement it is the process in which you offer a large and one-time amount to your creditor for the total amount that you owe. In return, the creditor ‘forgives’ the remaining debt. That means the balance amount is ‘waived’ or erased.
You may now ask why a creditor will be willingly so kind to you and forego the amount that is justified and legally payable by you, especially when it is a substantial portion. Well, the primary intention behind this move is that the creditor is either facing a financial crunch himself or is afraid of your eventual inability to pay back and they will lose the entire amount due. ‘Something is better than nothing’ is what they believe.
Furthermore, in such situations, the creditor tries to protect the financial bottom line. This is the most significant factor that you should keep in mind when you start negotiating with your creditor.
Ideally, loans can be of two types: secured and unsecured. Loans such as credit cards and others are unsecured where there is no pledge for any collateral to the creditor. On the other hand, secured loans usually carry collateral that the creditor or the debt collector may seize in case you are unable to repay your loan.
Therefore, while negotiating you must follow the process accordingly as it will be different for different types of loans.
Always Know the Downsides
When you are struggling to repay your outstanding balance it is often tempting to settle your debt but ideally it is not a very good option to choose. When you go through the debt settlement reviews you will come to know n-number of incidents wherein a debtor has faced severe consequences of debt settlement.
Moreover, it is also not good for the lender having to forego a considerable amount which they legally deserve and own. Therefore and not surprisingly, lenders do not favor or advertise debt settlement at any cost. Furthermore, there is no solid statistics and data to support its rate of success.
That means opting for debt settlement should ideally be your last straw when you severely fall behind your bills as well as that of the creditors fearing a complete loss. It is ideally an option to get back on your feet when you are slowly but surely spiraling towards bankruptcy.
Pros and cons of it
All is not bad about debt settlement as it has some significant advantages such as:
- It helps you to shrink your present debt load
- It helps you to get rid of your load through one-time payment and
- It allows you to sleep well at night being debt-free.
However, it also has a few substantial shortfalls that you must consider as well. If you do not then you may end up in a more taxing situation than before. The cons are:
- You will need to arrange for a sizable amount of cash at one time
- If it is a credit card debt, you also have the risk of your account being closed completely after settlement and
- It will reflect in your credit report thereby lowering your credit score making it difficult for you to get loans for a couple of years down the road.
However, debt settlement is still favored because:
- The lender gets a large chunk of money instantly and prevents complete loss
- The debtor stops making monthly payments and not has to worry for money every month.
With all these facts, information and knowledge you are now confident to meet your creditor for a negotiation.
Tips to negotiate
When you are confident that debt settlement is the right option for you to get rid of your debt and want to go for it, the next step is to prepare yourself for the negotiation.
- You may opt for hiring a professional debt negotiator or do it yourself but keep in mind that the creditor is legally obligated to negotiate with you. That means a professional negotiator does not have any added advantage to get a better deal than any account holder.
- Whether you want to hire a professional or not, one useful tip to follow is to present yourself in such a way that it appears that you are really in a bad financial position to make the full payment.
- Substantiate your position with relevant proofs such as the financial and credit card statements for the last few months but make sure that it does not reflect your visits to five star restaurants or designer boutiques to lose the sympathy of the creditor.
- Start the process by calling up the customer service department and ask for a person to speak to. This person should be a manager preferably in the debt settlement department.
- When you speak to the manager explain your dire situation by highlighting the fact that you have arranged for some cash and want to settle the account before the money is spent somewhere else.
If possible mention that you have multiple accounts to settle in order to get a competitive offer. Follow the rule of thumb and start by offering an amount that is almost 30% of the outstanding balance. At no cost, go beyond 50% of the amount due or else settle with a different creditor. In the end, get everything in writing.
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