Rather than paying a 10% monthly charge or a flat fee to a professional debt negotiation service, do it yourself debt settlement offers an alternative way of negotiating debt. Whilst a debt settlement service has more experience with the negotiation process, it is possible to reduce the principal without expensive advice. An appreciation of why lenders are prepared to listen, the circumstances that lead to successful negotiation and how to confidently communicate with creditors can greatly improve success rates.
Why Creditors Are Prepared to Negotiate Debt
Levels of default are rising and delinquent accounts increasingly lead to bankruptcy. For example, the Cobra Payday Loan default rate was 8.26% in April 2009. If a customer declares bankruptcy, the creditor or collection agency will receive nothing. Unless the debt is secured against an item of value, such as property or a car, most lenders will be prepared to reduce credit card debt in return for getting a lower percentage of their money back.
Default is Key to Successful Do It Yourself Debt Settlement
Lenders won’t negotiate debt with a customer if their account is always paid within the normal payment cycle. In order to reduce credit card debt, the account should be in a delinquent state and have been sold-on to a collection agency. This provides an opportunity for the downward negotiation of debt because defaulted accounts are regularly purchased for a few cents to the dollar. The prospect of a payment up-and-above this figure represents a profit to a collection agency.
Proper Budgeting to Pay Off Debt
Unless the debt negotiation process is handled professionally, creditors will not play ball. Produce a comprehensive breakdown of income and expenditure to determine how much can affordably contributed to creditors at month end. Veteran negotiators with established industry contacts offer at least 50 cents to the dollar when arranging a monthly plan so it will usually be necessary to offer more than this to settle the debt.
How the Need for Credit Card Debt Negotiation Arose
Send a registered letter to each creditor documenting why it is no longer possible to make the repayments. Redundancy, poor health or divorce are all viable reasons why creditors are prepared to negotiate debt. Documentary evidence to support an application, such as proof of the unemployment benefits, will increase the likelihood of getting a debt-free solution approved. This is because it shows that the customer is telling the truth and that the debt problem is being taken seriously.
Negotiating Credit Card Debt Payments with Creditors
Once a creditor has received written confirmation that the debtor wishes to negotiate, it is the right time to call. Always keep a copy of the documentation that will be sent in for reference purposes and have a clear idea of the objective of the negotiation process. Be polite, but assertive, when talking to the lender. Make it clear that the reason for performing this process is as an alternative to bankruptcy. This will make the advisor think twice before rejecting a reasonable proposal.
Debt Settlement Program vs Do It Yourself Debt Free Solution
A do it yourself credit card debt settlement program is a way of eliminating some of the principal and improving affordability without the help of a professional negotiator. It is important to realise that it takes time and experience to become an expert in debt negotiation so it is likely that the best voluntary agreements will only be reached with the assistance of a seasoned professional. It is simply a matter of determining whether the money an expert can potentially save is greater than any fees that accrue for providing a debt settlement service.