Negotiating Debt Reduction
Can It Be Done?

There is no question that negotiating debt reduction can be accomplished, many debtors have done is successfully. Before you try it yourself get answers to a few important questions that will greatly improve your chances of a successful negotiation.

Like most people, lenders, whether they are banks, automobile finance companies, credit card companies, or some other firm or person, will act in their own best interest on issues that concern money, repayment of debt, or collection of interest and fees.

This is a very important point to remember because if your lender doesn't think they are acting in their own best interest by a negotiating debt reduction with you, it simply won't happen.

Before you get started know the answers to these questions.

• When will doing your own debt reduction talks work?
• When won’t trying to do it yourself work?
• How do you go about getting your debt reduced?

Negotiating Tactics and Protocals

Let’s start with last question. How to get a debt reduced? As with any negotiation you will need to do a little ground work before you begin and follow sound negotiating principals.

Talk to the right person — Make sure you are talking to someone who actually has the power to negotiate the terms, or interest rate, or fees you are looking to change or reduce. For small items like getting a late charge on your credit card account waived you might be able to simply talk to the representative that answers the phone. However, as the amounts get larger and the decisions get bigger you'll have to move up the chain. Your next step would be to ask for a supervisor if you don't get satisfaction.

Always treat the people you encounter well — And always treat everyone with respect. The last thing you want to do is make some kind of threat against the person you are dealing with in negotiating debt reduction. If you keep things professional and respectful you will have more opportunities to renegotiate. If you burn the bridge down with foul language or abusive behavior you are finished before you even got started.

Always keep in mind who has the juice — This one is real simple. If you are calling your credit card company about getting your interest rate reduced and you have no intention or ability to payoff the debt and walk away, they have the juice and you'll simply have to deal with the results of your negotiation, good or bad. If on the other hand you are a day away from filing bankruptcy and they know it, you have some leverage and your credit card company may settle your debt for less than the amount owed.

Only make demands or offers you can close — Sometimes in negotiations you will be forced into a corner and when there you must know exactly what you want and what you are willing to do to get it. That means if you are talking to your bank about a mortgage issue and are threatening to let your house go to foreclosure, you better really be ready to do so. Bluffing can work on occasion, but only when you can back up your statements with appropriate action.

Will Negotiating Debt Reduction Really Work?

The short answer is—sometimes. You can rest assured if you have been paying your bills on-time and in full every month and you call one of your lenders to ask for a reduction in the principal on your loan you won't get very far.

However, those with good credit who pay bills on-time are very apt to be able to get the occasional late payment or annual credit card fee waived with one phone call.

It is actually debtors in serious trouble and on the verge of bankruptcy or default that have a better chance of negotiating debt reduction. Your best chance for success will be when you can prove what you are saying and you are dealing with an unsecured loan like a credit card or other revolving account.