If you are drowning in debt, it may be time to start negotiating with your creditors. Looking at the full amount owed can be overwhelming. Then you have to take into consideration that every month there are more late fees to be added and increasing interest payments. Sometimes, you may not even be able to pay enough to cover the late fees or the interest, much less take anything off the principal. When it comes time to negotiate these amounts, you can use these tips to reduce what you owe and get your debts paid off faster.
Decide How Much You Can Afford Each Month
Before you can start negotiations, you have to know what you are working with and how much you can realistically pay on your debts. Figure out how much you can apply toward old debt every month. Divide this amount among your debts to see what kind of payments you can afford. If you have small debts, figure out which ones you can pay off in full each month, and then take that amount from the total you set aside. Now divide what’s left among the other debts.
Make an Offer
Contact each one of your creditors. Start with the ones with the smallest balances and offer them whatever you are able to pay off that day. Keep in mind that you may be able to negotiate a lower overall balance and eliminate the debt with a small payment. Start with about 10 percent of the debt and work your way up. Creditors are usually willing to negotiate the total amount as long as they are able to close the account and get some kind of payment out of it.
Don’t just pay your debts and leave it at that. You don’t want your settlement to reflect on your credit report. Ask your creditors to agree to show the account as paid in full rather than settled. Make sure to get the agreement in writing before you make the payment so that you can be sure your creditor will have to stand by what they agreed to and you can consider the account closed.
Remember that creditors can write off some of their losses on taxes, so they have a bit of room to reduce your amount owed. Now, you just have to stand by what you agreed to pay. If it seems too much for you to ever be able to manage, you might consider filing bankruptcy instead, so that you have a chance for a fresh start. And, although it may seem like a simple process, negotiating with your creditors can become complicated. It’s best if you can’t get anywhere with your creditors, to consult an experienced lawyer. Often, just being contacted by a law professional, can change the entire outcome of your debt.
Have you ever attempted to negotiate your debts? Let us know how it went in the comments. Also, share this post online for others who may be in similar situations.