When simple management of money can’t save you from extreme debt, debt negotiation is one of the ways that a person can become financially free. There are many reasons that an individual can become in debt. It could be a loss of a job, increase in bills, or some other unforeseen situation that can help place you in debt that you are unable to handle.
Remember When Negotiating
When you decide to negotiate with your creditors regarding your debt, it is important to remember a few tips.
- Prioritize: Placing your bills in an order from most important to least can help you to determine what debit should be paid off first. Commonly one will want to eliminate the lowest debts first; however there are some types of debts that are more important than others. Make sure you prioritize wisely.
- Saving and Budgeting: When walking into a debt negotiation you will need to have something to offer. One way to do this is through lump sums. They do not always have to be large payments, but you will be required to make a payment at the completion of a debt negotiation. The best way to save up money is through reviewing your budget. Write all your bills and pleasure expenses going out and income coming in. Determine where you can trim your finances to allow payments, never offer to pay more than you actually can afford.
- Record the Call: It may seem silly to record the phone call you make to the creditor; however it can be your best ally. Telling your creditor that you are recording the call can help to ensure that your creditors will be peaceful, respectful, and possibly increase your chances of getting a helpful negotiation. Do not get emotional when dealing with your creditor. Explain your hardships, but do not tell them your life story. They most likely won’t offer much sympathy because they are looking at the benefit to them.
- Bankruptcy or Brag: One thing that is important is that if you are considering bankruptcy mention that you are leaning this way. To file bankruptcy you will discharged of all debts and the creditor will lose out on all return of the money. Losing some rather than all of it is a better bottom line decision. If you aren’t looking into bankruptcy you may want to brag about your money management skill during your debt negation. If you have tried to make payments on time, let them know of your efforts and successes.
- New Terms: When looking into creating new terms to your debt you want to make sure that you aim to have 50% of the debt reduced. Begin with a very low lump sum offer, 20% to 25%. Keep firm don’t accept anything that you know you can’t pay for monthly.
Different Types of Debts
There are different kinds of debts and each one should be handled differently through the debt negotiation process.
Consumer and Credit Cards:
Consumer and Credit cards can be one of the most negotiated of all the debts. These companies are more willing to help during debt negotiation because they know they are the first to be discharged if one goes through bankruptcy.
Secure Loans and Mortgage Lenders:
You will probably have more difficulties with debt negotiation in comparison to the credit card companies. However it might be possible to negotiate for a loan modification. This could help to reduce your monthly payments. Another option might be a home refinancing; this can lower your payments as well. In the case of both a secure loan and a mortgage smaller banks are going to be more likely to negotiate.
When undergoing a debt negotiation about your student loans, it is important to remember something. This is one of a few types of loans that cannot be discharged through filing for bankruptcy. The positive is that there are government programs that can help you with this debt. They can help you to reduce the monthly payments and sometimes they can even help you cancel out the loan entirely.
If you decide that you are unable to do this yourself that is okay. Search for a debt relief service that can help you with your debt negotiation. However, you will be asked to stop making payments to your creditors while going through the negotiation process. Don’t take advantage of the extra money, place the money you would normally put into the creditors into a savings account. This will give you the ability to offer something to the creditors once the negotiations are in full swing.
No matter what your decision on debt relief make sure that it is the right choice for you. Ensure that you are confident in what you are doing when it comes to debt negotiation.