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Client Log InCan You Negotiate Your Own Debt?
The process of debt settlement can be worthwhile for the individual burdened by high levels of unsecured debt, such as credit cards. Debt settlement takes place when a debtor successfully negotiates a payoff amount for less than the total balance owed on a debt. This lower amount is agreed to by the creditor or collection agency and is fully documented in writing. Ideally, this lower negotiated amount is paid off in one lump sum, but it can also be paid off over time.
Creditors are more likely to settle once a debtor has already demonstrated an inability to pay, so if you’ve already fallen behind on payments by four or five months, it could represent an ideal opportunity to begin negotiating with your creditors for the best debt settlement. Even though it may seem surprising that banks would settle for less than what is owed, the statistical certainty that not all borrowers will actually pay back is built into a bank’s carefully formulated lending model.
Know Your Debt Settlement Timeframe and Budget
Debt settlement can be a lengthy process, but ideally, it is something that you should endeavor to complete as quickly as possible to minimize damage to your credit score. The key to effective debt settlement is possessing the financial ability to settle. Therefore, if you have the means, you should begin saving for an eventual lump sum payment or structured payment schedule that can be completed within two years from initiation.
You can consider a longer repayment schedule if truly required, though it may also be worth looking into a debt management plan (or possibly even bankruptcy) as your preferred debt relief strategy. If you’re still leaning toward debt settlement, the question then becomes whether to pursue the debt settlement process on your own, or to enlist the help of an experienced debt settlement company.
Can You Negotiate Your Own Debt
Debt Settlement is Complex
If you’re going to pursue debt settlement, it is important to know what’s involved. For starters, delinquent accounts typically generate bothersome phone calls from creditors and collection agencies that are easier to put a stop to once you’ve agreed to work with a settlement company. It’s simply not as easy to do this when pursuing debt settlement on one’s own. In either case, it’s important to recognize that delinquent accounts are accruing interest expense (including penalty APR, in some instances) along with late fees, so you want to expedite your settlement process to mitigate these mounting expenses. A good debt settlement firm will structure an effective timeline for you. There are several additional important factors to consider.
Its important to know debt settlement will have a negative impact on your credit score. In fact most clients who enroll in debt settlement are already behind on payments which has most likely already had a negative impact their credit score. Debt settlement is made for people facing a financial hardship, once the program is complete and the debt is settled you can begin to rebuild your credit score.
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Things That Must Be Done for Effective Debt Settlement
Either you or a debt settlement company must assess your financial situation and determine how much you can save each month toward your eventual settlement. A good debt settlement company will approximate how much you will ultimately need following a specific review of your creditors and a determination as to which of them may be potentially legally aggressive. You also must generate a hierarchy of creditors – who to settle with first, and at what percentage – followed by the next creditor and percentage, and so forth, through your entire sequence of creditors.
You also must manage all communications with your creditors. Accordingly, you must formulate a strategy of how to best submit debt settlement offers that paint your situation in the most advantageous possible light and that provides creditors with proper incentive to settle with you. Remember, creditors are not legally responsible for accepting any settlement offers. To the contrary, creditors often have legal ground to sue for non-payment, a fact that only enhances the need to expedite the debt settlement process judiciously.
The Choice is Yours
As you can see, debt settlement is not a simple, straightforward, cut and dried process. Rather, it can be quite nuanced, as communications with creditors must be carefully crafted, with proper prioritization given to those creditors and collection agencies that have the potential to cause the most problems for you – both legally and financially. All of this must be accomplished while trying to save as much money and time as possible, along with mitigating the ongoing damage to your credit score and profile.
Throughout debt settlement negotiation, it is critical to know what information to disclose, the manner of structuring offers, and the timing of such offers. This ongoing process of communication and negotiation is often best handled by a reputable debt settlement firm staffed with experienced professionals who are comfortable navigating these treacherous waters. If you’re burdened by high levels of unsecured debt, contact us here at United Debt Settlement. Our experienced debt counselors will assist you in the process toward successful debt settlement and financial wellness.