Getting relief from your debt may seem like a daunting challenge. However, good negotiation skills could significantly reduce the amount of debt you owe. How is this possible? Your creditors are actually willing to take less than what you owe in certain situations. Coming to terms on a debt settlement can make it much easier to pay off your outstanding debt.
Texas Debt Settlement Advice – Demonstrate An Inability To Pay
Creditors are not going to negotiate with you unless you demonstrate a financial hardship. Your creditors only want to negotiate with you because they would rather get a portion of the debt as opposed to nothing. This means you are not going to be able to negotiate a settlement just because you want to pay less each month.
You could stop making your payments in an attempt to gain leverage. Be sure that this is something that will be worth whatever money you save each month. Creditors will usually only negotiate once your payments are 60-90 days past due. Having payments that are 60-90 days past due on your credit report usually harm your credit score. But the goal is to become debt free so this is something you can cope with. And the effects are temporary. Once your debt to income ratio improves your FICO score can go up quickly.
The best thing to do is to write a financial hardship letter. Doing so will allow you to make your case directly to your creditors. Be sure to include details about why you are having a hardship, how much you owe and any other details that will make your case more compelling. It is a good idea to limit yourself to no more than one page. You can also call your creditors if you don’t want to write. Document everything.
How To Negotiate A Debt Settlement
Your creditors are only going to work with you to a certain extent. You have to come up with an offer that is going to work for both parties. Never make an offer that you are not going to be able to follow through with. Not living up to your end of a debt settlement could mean going to court over the debt.
Offer to pay about a very low number to start, say 20 to 25% of your debt. Doing so gives you some wiggle room for when your creditors counter your offer. Giving your best offer right away is not a good negotiation tactic. Be prepared for most lenders to simply balk at your first proposal. This is just a tactic to see if you are really going to fight for a lower balance. Most debtors simply crumble when their initial request is denied.
Don’t be surprised if you get an offer that only reduces your interest rate a little bit. For example, you may be paying 18 percent interest on your credit card. The credit card company may decide to only cut your interest rate to 14 percent.
At this point, you should probably seek out the assistance of a lawyer or another professional. Debt relief specialists have relationships with creditors that can be leveraged for better deals. Do not give up until you have lowered your payment to an affordable amount. It usually takes time for creditors to agree to a settlement that suits your needs. You also have the advantage of living in Texas so you do not have to fear wage garnishment from your creditors. Creditors cannot garnish your wages in TX so they are more likely to settle with you once you fall 150 to 180 days behind on your bills.
What Type Of Settlement Should You Go For
Your settlement may be in the form of a lump sum payment. However, you may be able to get a settlement offer that can be paid in installments. Your choice will depend largely on your current financial situation. Those with some money in the bank should pay off with a lump sum if at all possible. Debtors who currently have nothing to fall back on would do better with an installment plan.
The biggest advantage to a lump sum payment is the elimination of future interest payments. Any type of installment plan may be subject to interest charges as well as a higher settlement offer. Lump sum payment of your settlement amount will also get creditors to finally go away at a lower amount.
For illustration purposes only: Say you have a $20,000 Bank of America MasterCard credit card. They will settle your debt for 25% if you pay in one lump sum payment or $5,000.
But if you have to spread the payment out over 3 to 4 months, they may only be willing to take 35% or $7000. That’s a big difference.
Getting rid of your debt as fast as possible should be a top priority.
A debt settlement offer can be the fastest way to move forward from your debt. Paying significantly less than you owe can make it much easier to finally pay down your balance. The option to pay off your debt with a lump sum payment makes that debt go away even faster. All it takes is some basic negotiating skill along with some patience to finally get what you want. Always contact a professional if you need more Texas debt settlement advice. Call us to find out more about debt settlement all over America. Fill out the form today to find out just how much a debt settlement could save you.