Debt Settlement Negotiations: Do-it-yourself Guide

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Debt Settlement Negotiations: A Do-It-Yourself Guide
Making a deal on your own isn't easy, but it can save time and money when compared to the hiring of a debt settlement firm.
Written by Sean Pyles Senior Writer | Personal finances and credit, and personal finance Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet's "Smart Money" podcast. On "Smart Money," Sean talks with Nerds on NerdWallet's NerdWallet Content team to answer listeners' personal finance questions. With a focus on shrewd and actionable money advice, Sean provides real-world guidance that will help people improve in their finances. Beyond answering listeners' money questions on "Smart Money," Sean also interviews guests outside of NerdWallet and produces special segments to explore topics such as the racial gap in wealth as well as how to get started investing and the history of college loans.
Before Sean was the host of podcasts at NerdWallet the company, he also wrote about topics related to consumer debt. His work has been published throughout the media including USA Today, The New York Times as well as other publications. When when he's not writing about personal finances, Sean can be found working in his garden, going on walks, or walking his dog for long walks. He lives at Ocean Shores, Washington.





Aug 6 Aug 6, 2021


Written by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring debt and money management Kathy Hinson leads the core personal finance team at NerdWallet. In the past, she worked for 18 years working at The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. Previous experience included news and copy editing for several Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in mass communications and journalism in the University of Iowa.







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With do-it-yourself , you meet directly with your creditors in an effort to settle your debt for less than you originally were owed.
The strategy works best for debts that are already in arrears. Creditors, seeing missed payments stacking up, may consider a settlement because partial payment is preferable to no payment in any way.
The option of settling your debt is available if your payments are at least 90 days late, but it's more feasible when you're more than five months in the red. But because you must keep putting off payments while trying to negotiate, credit damage piles up and there's no guarantee that you'll end in a settlement.
There are more effective ways to than DIY to settle your debt. If you choose to go through with debt settlement negotiations, doing it yourself may be better instead of using a service one that is costly and ineffective.
This is how DIY credit settlement is compared with using an agency for debt settlement and how you can deal with creditors at your own.
DIY debt settlement vs. debt settlement companies
Cost and time are the primary differences between debt settlement with the services of a firm as well as self-service.
Advertising for debt-settlement has claimed that the companies could help consumers cut their debt by up to 50% and get them free of debt in as short up to 36 months.
It is possible to see faster results when you self-help debt settlement. While completing a plan through a business can take up to two and a half times longer or even more time, you may be able to pay off your debts yourself in just six months after becoming delinquent, according to Michael Bovee, a coach for debt settlement.
With a debt settlement company will likely charge the company a commission of 20% up to 25 percent of your enrolled debt once you agree to a negotiated settlement and make at least 1 payment towards the lender from an account set to be used for this purpose, in accordance with the Center for Responsible Lending.
Additionally, you'll need to pay the monthly and setup fees that are associated to the account. If you pay $9 per month to run the account and a setup fee of $9, you could spend up to $330 over 36 months on top of the fee taken for each debt that is settled.
Companies that settle debts also be unable to achieve their goals due to inconsistent. According to the Consumer Financial Protection Bureau has logged more than 330 complaints about debt settlement firms in the year 2014. Among the most common issues were excessive fees and fraud. In 2013, the CFPB took legal action against one firm, American Debt Settlement Solutions which was found to not resolve any debt for 89% of its clients. The company in Florida was able to shut down its operations, as per a court order.
While there's no assurance of results with debt settlement -either through a firm or by yourselfyou'll certainly save yourself time and fees if you go by yourself.
How to pay off your debt:
How to conduct a DIY debt settlement step-by-step
If you decide to negotiate with a creditor on your own, navigating the process requires some experience and perseverance. Here's a step-by step guide.
Step 1 Determine whether you're a great candidate
Consider these questions to determine whether DIY the process of debt resolution is a good option:
Have you considered it ? Both can resolve debt with less risk, speedier recovery and more reliable results over debt negotiation.
Are your debts already delinquent? Most creditors will not even look at settlement until your debts have been at least for 90 days late. Bovee who is a debt settlement coach, says that you have a greater likelihood of getting a settlement with the original creditor that is at least five months past due and that's about the time that many creditors sell the debt to a .
Do you have the money to pay? Certain creditors may want to pay in one lump-sum, while others will be willing to accept payment plans. Regardless, you need to have cash available to back up the settlement contract.
Do you believe in your negotiation skills? It is essential to have confidence in your ability to negotiate DIY debt settlement. If you believe you can, you probably can. If your confidence is wavering, DIY debt settlement may not be the right choice to take, Bovee says.
Step 2: Understand your Terms
It is important to negotiate two things: the amount you can pay and how it will appear to your credit scores.
For payment, you may be in a position to pay your debts at a rate of 40 percent to 50 percent of the amount you owed in the first place, Bovee says.
When you're working to settle your debt as a percentage of what you are owed, think about the amount you could pay as a dollar amount. Look over your finances and determine the amount. Note that on the portion of debt which is forgiven if the amount is at least $600.
As for your credit is concerned, it's likely to be damaged due to missed payments before the time you're eligible to settle. You may be able to redeem yourself by determining how the settled debt appears on your credit report.
Settled loans are typically marked by the designation "Settled" or "Paid Settled," which isn't a good look when you look at credit scores. Instead, you should try to get your creditor to mark the account as settled "Paid as Agreed" to limit the damage.
Step 3: Call the number
The process of negotiating with your creditor will require persistence and persuasion. This is an important step during the settlement process.
It is possible to settle the payment in one go but it may require a few phone calls to find an agreement that works for both you and your lender. If you're having trouble with one representative you've tried calling, try again to talk to someone more flexible. Ask for a manager if you're having trouble with telephone representatives on the front line.
Make sure you have a concise and clear explanation. Simply describing the financial difficulty which caused you to not be able to pay the bills could increase the sympathy of the creditor to your situation.
Don't lose sight of the amount you can realistically pay. Begin by lowering your price, and try to work toward an acceptable compromise. If you know you can only pay half of your original debt, try offering around 30 percent. Don't agree to an amount you can't afford.
Success can vary depending what the debtor is. Some are open to settling but others aren't. If you're making no advancement, it could be time to reconsider alternatives to debt relief, such as Chapter 7 bankruptcy or a .
Step 4: Conclude the agreement
Before you make any payment be sure to get the settlement terms and credit report in the form of a letter from your creditor.
A written agreement holds both parties accountable. They must adhere to the agreement, but in the event that you fail to pay, the creditor can retract the settlement agreement and you'll end up back where you started.
"Debt settlement is all about commitment. If you miss a payment the debt is over," Bovee says. "Say you're on a settlement plan for 12 months. The initial six months of the plan, however, when you don't make it to the seventh month, they'll use the last 6 months (of payments) and apply it to the full amount."



The author's bio: Sean Pyles is the executive producer and host on the NerdWallet's Smart Money podcast. His writing has appeared on The New York Times, USA Today and elsewhere.







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