How to Negotiate Debt Settlement

Knowing how to negotiate debt settlement has unfortunately become vital for many people left high and dry by the state of the world economy. High unemployment means more average everyday people are struggling to meet financial obligations.

If you find yourself in the position where you have a large outstanding debt for which you no longer have the enough income to manage the monthly payments a debt settlement may be an appropriate course of action for you. This is where you negotiate with your creditors to dismiss the debt in exchange for a one-time cash payment which is less than the outstanding loan balance.

How to Negotiate Debt Settlement: The Process

Every debt settlement negotiation will go through the following series of steps. Bear in mind that how long the process takes to complete will depend entirely on your own specific financial circumstance.

• Employ a service or lawyer to help you negotiate. You can go through the process yourself but it is much easier when you have experienced expert. This step is optional.
• Obtain a free copy of your credit report. You can pull one from each of the three major bureaus once a year.
• Contact the creditor. You will already have heard from the creditor at this point because you will have been not making monthly payments. Still you need to contact them in writing suggesting the possibility of a settlement.
• Make an offer. The first one should be lower than what you can pay, but not so low that the creditor dismisses your offer.
• The counter offer. How many of these there will be depends on how much you owe, how aggressive your creditor is, and how good you or your hired help is at negotiating.
• Either settle, or change course. Remember the negative effects a debt settlement can have on your credit score. You need to decide what is most important to you over the next five to ten years before you decide whether the best deal on the table is better than an alternative like bankruptcy.

Employing Help

As mentioned, hiring experts in the field of debt settlement can streamline the process, take some stress off of you, and, preferably, get you a better settlement deal. However all available options are not created equal.

Recently, the federal government has tightened up regulations relating to debt counseling and debt settlement services, but you will still find plenty of scammers and shady companies in this industry. Always check credentials and ask for references before you hire someone.

Playing Hardball

Sometimes, creditors will immediately see that a settlement is mutually beneficial for both parties and will agree to settle fairly and in a reasonable period of time. However, other times this won't be the case and you will have to be prepared to deal with a hardball response, on occasion this might even bring threats and intimidation from an unscrupulous company.

Avoid responding with threats of your own and try to maintain a professional attitude at all times. Remember that most of the time, initially, you will be dealing with someone relatively low in the company pecking order with little power to make a decision. Don't be afraid to move up the ladder as needed to get satisfaction. You may find someone with more seniority to be more understanding of your situation.