by Frank Collins
Avoid the Fees. Settle Debts On Your Own
Anyone with debt has probably given at least a second of thought to debt settlement. The debt settlement industry has a bad reputation because of the proliferation of scam companies, but there are still some good companies out there. And there are more of them thanks to a recently passed debt relief law. But, even reputable debt settlement companies charge fees that can total several thousand dollars. You can save money and settle the debts on your own.
What You Must Do to Settle Your Account
To settle your debts, you’ll have to do two things. First, you’ll have to let your accounts go delinquent for several months. You have to do this because creditors only settle accounts on which they’re at risk of losing money. Your account only enters this risky territory after you fall at least 90 days past due. Plus, you’d have a hard time meeting the second debt settlement requirement if you were making payments on all your debts.
Second, you’ll have to save up enough money to make a one-time, lump-sum settlement around 40% to 70% of your balance. The exact amount varies by creditor. Some may only accept a higher settlement, while others may go for the lower amount. If you’re dealing with a debt collector, you can typically settle on the lower end, sometimes even as low as 5% or 10%.
Instead of sending your regular monthly payment to your creditor, you’ll put it in a separate checking account to accumulate. Then, once you have enough money to settle an account and your account is “risky” enough, you can start negotiating with your creditor.
How to Make a Settlement Offer
Call your creditor and say something like this: “Hi. I know I’m behind on my payments and I’ve been hoping I can get caught up, but unfortunately, I’m in a financial crunch right now. I don’t think I can resume making regular monthly payments. If I can come up with enough money to settle this account, would you consider that?” Wait for a response.
Politely refuse any payment arrangement, minimum payment reduction, or hardship arrangement. You’re goal is to settle the account. You’re having trouble making monthly payments which is why you want to settle. If the creditor asks how much you’d be able to settle for, give them the amount that’s around 40% of the debt even if you have more saved up. Give the creditor room to negotiate upward if necessary. Know the maximum you’re willing or able to pay. Politely refuse any offer you can’t afford. End the call and try again later.
But, if you do get a settlement agreement, ask the creditor to fax you a settlement letter on company letterhead. Fax is the best method for receiving this letter because you’ll get it faster than if it’s sent regular mail. Once you have an acceptable settlement letter, you’re ready to make the payment.
Debt settlement isn’t difficult and doesn’t require you to have special relationship with the creditor. Just follow the plan of saving up and making an offer when you have the money and you’ll see results.
Frank Collins is a seasoned writer with strong background in both personal and business finance. You can read more of his articles about debt relief options, credit counseling and related services at the debt settlement blog
