Negotiating with creditors and collection agencies to reduce debt continues to be a popular option among consumers. This debt relief method is based on the possibility of being able to convince creditors to settle debt for an amount that is less than you owe.
Creditors may reach an agreement with their debtors to let them pay a lower amount than the actual total that is owed on the debt. Settlement negotiations indicate that you have taken steps to pay as much as you can on a debt. Settled debt is no longer outstanding and this will be shown on your credit report.
Debt Settlement Negotiation – Making an Offer
Negotiating a debt settlement with a creditor requires the right approach to yield the best results. It is important to begin the process by determining how much you will be able to afford to pay. Assess your budget and make sure that you offer what you can actually afford. After establishing how much you can pay, start negotiations with a reasonable offer.
Importance of Written Agreements
- Any deal that you make with your creditor should ideally be in writing. It is advisable to have the details of your agreement written down before you send the money. It is also preferable to have your agreement reviewed by a financial advisor or debt relief specialist.
- The agreement should state the amount that will be paid, whether the settlement will be paid over time or as a lump sum, when payment or the lump sum is due, how payments will be made, the creditor agreeing to report the full payment to credit bureaus and any other conditions that pertain to the agreement.
- Make sure that you understand the contents of the agreement and that it reflects the agreement you made before you sign it. You also have the option of preparing the agreement, signing it and sending it to the creditor in case they are not in a position to write the agreement.
Quick Tips
- If you encounter a creditor who is not willing to negotiate, get in touch with them again and find out whether you can work out a compromise that is favorable for both of you.
- People who are not confident about handling debt settlement agreements or negotiations can consider hiring debt relief firms that will do it for them. This is a worthwhile solution for individuals who are dealing with a substantial amount of debt.
- Mentioning the possibility of bankruptcy may compel a creditor to settle unsecured debt for a lower amount than you owe.
Conclusion
Under ideal circumstances, having a lot of debt prompts you to identify a debt solution that enables you to pay the total amount that you owe to reduce credit damage. The unfortunate reality is that everyone is vulnerable to debt levels that are beyond their income and this makes it virtually impossible to pay back the entire amount within a reasonable period of time. Some debt solutions are not suitable for people who are in default. In this situation, offering debt settlement to creditors is an option worth considering.
