Negotiations
Training
When
Your Debt Catches Up with You:
Settling with Creditors
on Your Debt
College students
are notorious for getting roped in by credit card companies who
dangle attractive
offers of easy credit when money is a scarce resource. Status-oriented
individuals are often finding themselves buying
more car or house than they can truly afford just to keep up
with the Joneses. Graduate students lean on student loans to help
pay for expensive but valuable graduate degrees. Even those of us
with the
greatest intentions can suddenly find ourselves buried in a
mountain of debt. What once seemed manageable can slowly turn into
an apparently insurmountable level of debt that needs
to be resolved.
Many people
turn to debt settlement to resolve
those situations when they simply can't keep up with all the
debt they've accumulated over the years. Some creditors, realizing
that getting something is better
than nothing, will even settle for 50% of owed funds via lump-sump
payments. Unfortunately, far too many people are not aware that
they can work directly with their creditors to resolve these difficult
issues. Before venturing down this path, it helps to know a
few tips
on negotiating a debt settlement.
* Determine
if you will use a Professional Debt
Negotiator - Some people would rather not go through this process
without an experienced "counselor" to provide assistance.
Professional negotiators
and arbitrators are available to provide this service. Before deciding
to use one, find out fees and terms. Many debt consolidation companies
will be able to work with you to set up a payment
plan with creditors.
* Determine
which Debts to Settle - Higher interest loans should be settled
first. Many will opt to settle credit card debt before settling
school loans which tend to have lower rates. Others will opt to
settle those amounts that make the biggest
financial impact on monthly cash flow. A small $30.00/month
payment is not worth settling next to a $450.00/month car payment.
* Do You Have
Funds Available? - Take a good look at what funds you have at your
disposal to be able to make lump-sum payments. If you have a reasonable
amount of liquidity, lump-sump settlements may make the
most sense. If you are not that liquid, focus on setting up
payment plans.
* Realize that
Some Creditors Will Report You - You should understand that some
creditors will report you to Equifax and other credit reporting
agencies once you've settled. There are times when this is simply
unavoidable but is preferred to the anguish that accompanies having
too much debt.
* Good Will
Does Count - The fact that you have contacted your creditor will
go a long way in helping you resolve
your situation. Creditors are usually willing to work out a
solution that will, in the end, benefit both sides.
* Bankruptcy
is the Last Option - Bankruptcy should always be the last option.
Always try to negotiate
a difficult situation first. While some think that bankruptcy
offers the easy way out, the long-term effects on your credit and
financial history are, for many people, not worth it.
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