If you've fallen behind on your debt payments and there's no chance that you can pay back the entire balance, it'll be wise to negotiate with creditors and get them to reduce your outstanding balance. If your bills are in collection, you may speak to your CA and settle your dues for less than the outstanding balance. This article deals with the tips you should follow while you settle your dues yourself.
Tips to negotiate and reduce your debt
Check out the 13 tips which can help you negotiate your dues successfully.
1. Negotiate for accounts having the lowest balance first
It is better to communicate with your creditors and settle those accounts which have the lowest balance first. Once you pay off the dues on those accounts, negotiate a settlement of the account having the next highest balance.
2. Create a budget so as to explain your financial situation
You need to prepare a monthly budget so as to inform creditors about your financial situation. It'll help creditors estimate how much you can pay on a monthly basis.
3. Check your affordability before you make an offer
Make an offer of settlement depending upon how much you can afford. Avoid asking creditors how much they are willing to accept for a settlement of your account. Do not agree to automatic electronic payments from your checking account or payments through post dated check.
4. Show the creditor you're determined to pay off dues
It is essential to make your creditors understand that you have the determination to repay your debts and bring your finances back in order.
5. Explain your debt payoff goals
When you're negotiating with creditors, explain what goals (for instance, you wish to pay in full and improve your score) you have in order to clear debts
. Unless creditors understand your goals, they may not agree to listen to your problem.
6. Explain how your creditors will gain if you settle the dues
When you're negotiating with creditors, make sure you explain how the creditors will benefit from a settlement. Make them understand that they won't have to approach CAs to collect your dues and they need not go to courts to sue you.
7. Speak politely with your creditors
If you're polite and understanding while dealing with creditors, it may be easier for you to get an agreement on debt settlement
8. Try again if the creditor refuses to settle the first time
If you negotiate to settle your dues and the creditor refuses to do so, you may wait for a month or so and try to negotiate again.
9. Do not give personal details
Avoid giving your personal details (such as your checking account number) to the creditors or CA.
10. Know your rights as a consumer
When you're dealing with a creditor or collection agency, make sure you know your rights as a consumer. Check out the provisions under the FDCPA
. It'll make you aware of what debt collectors
shouldn't do when they're collecting your payments. If in case the collectors violate the laws, you can take suitable action against them.
11. Be precise when you explain your problem
It is better to not give a lengthy explanation of why you can't pay. Creditors or CA will be more interested to know what alternative proposal you've thought of in order to get rid of dues.
12. Record your conversation with creditors or CA
There are 35 states which allow you to tape your conversation with creditors or CA. There are 15 other states where you can record the conversation after taking permission from the creditor/CA. Keeping a record of such communication prevents creditors from denying what they've agreed to.
13. Negotiate a "Pay for delete" or "Paid in full" status
When creditors agree to accept less than the amount you owe, they'll report your account status to the credit bureaus. In most cases, your credit report will reflect a "Settled" or "Paid as agreed" status, which has a negative impact on your credit score.
To avoid getting a credit hit, negotiate a "Pay for delete" agreement with your creditors so that your entire account detail is removed from the credit report. Alternatively, you may request creditors to update your account status as "Paid in full". Once the creditors agree to what you've requested, let them provide you with a written agreement of the same.
With proper negotiations, you can expect to come to a suitable agreement with your creditors or CA. Apart from negotiating successfully, it is essential to show that you're committed to fulfilling your obligations. Once the creditors realize that you're determined to make the payments, they're likely to co-operate with you and allow you to settle your dues for as much as you can afford.