Here are two statistics that may surprise you.
- Households that have credit card debt have balances averaging $16,748
- Households that have any kind of debt have a total average of $134,603 in debt, including their mortgages.
Where do you stand?
If your family has more than $16,000 in credit card debt or more than $134,000 of total debt, the first thing you need to do is admit that you have a problem. Step two, of course, is figuring out what to do about it. This means you basically need to become your own debt negotiator. However, being your own debt negotiator can be complicated and requires a lot of fast thinking. Do you believe you have what it takes to be your own debt negotiator? If, so here are seven tips that can help you be successful.
1. Be prepared to pay some money up front. Many lenders will want at least 50% of your overall debt up front. In fact, some won’t even begin negotiating with you until they’ve received some money.
2. Don’t be surprised if you have to deal with an attorney. Most lenders have customer service reps or agents to handle their debt negotiations. However, at some point, you may see a lawyer involved that is representing one of your lenders. But there normally needs to be a large amount of money involved before you see a lawyer involved.
3. When you make payments to a creditor, use a money order. You might never have thought of it this way, but if you make a payment to a lender with a check, it will have all of your pertinent banking information. So, if you are sued, the lender will have a much easier time getting at the money in your account.
4. Try to have the debt reported as “paid in full.” The whole idea behind debt negotiation is to pay off a debt for less than you owe. This is possible because most lenders will settle for less so they can at least get something back. The way you want the debt reported to the credit bureaus is as “fully paid” or “paid in full.” The way you don’t want it reported is as “settled,” “settlement” or “settled for less than the full amount due.” That’s because if the debt is reported that way, it will have a very bad effect on your credit score.
5. Consider hiring an attorney. If a lender refuses to negotiate with you, or if it fails to live up to its promises, you may have to file suit. This means getting a lawyer involved to strengthen your position. You’ll need to spend money to hire a lawyer, but a good one could save you more than she or he costs.
6. Be realistic in your negotiating. The customer service rep you’ll be dealing with will be a very experienced negotiator. He or she may convince you to back down a bit and accept a payment that is still more than you can afford. Don’t let this happen. It’s a mistake to agree to any debt settlement that you can’t comfortably handle. Be honest. Let the other person know what you’re willing to pay. If that doesn’t work, pull out the big guns and threaten bankruptcy. This will generally get what you want because lenders understand that if you’re forced into bankruptcy, they won’t get anything.
7. Determine how far the lender will go. Remember the adage that once you name a number you can’t go higher, you can only go lower. Make your first offer a low one. You might be pleasantly surprised as the lender might accept it. Are you asking it to waive your payments for a few months? If it offers three months, ask for six. In other words, always ask for more than you think you can get. The worst that can happen is that you’ll get a no. The important thing is to always aim high, and to know how much room you have for negotiating within your budget.
If you think you have what it takes to negotiate your debts, then go for it. But, if at the end of 90 days, you haven’t been able to negotiate any debts successfully, it might be time to hire a debt settlement company.