There are two types of debt settlements, including debt settlements with the original creditor and debt settlements with a collection agency. You should consider which type of debt settlement is best for your situation. If the debt is less than 180 days old, the original creditor will probably negotiate the settlement, while if the debt is older, the collection agency will probably negotiate the settlement on your behalf. Each entity will have its own rules and regulations governing debt settlement negotiations. If you’re unsure who you’ll be dealing with, you can always check the Better Business Bureau for information about debt collectors.
During the negotiation process, you should always be prepared to make a counteroffer. You should have your personal information, such as your full name, address, and account number, ready. It’s also important to state the amount you can pay and expect in return. A good starting point for a debt settlement is 30 percent of the total debt. You may also want to include proof of a financial hardship, such as unexpected medical bills or unemployment.
Another common pitfall of debt settlements is that the companies will charge you in advance. This can reduce the amount of money you can save. As a result, it’s crucial to save money before the negotiation process. You can even use tax refunds or bonuses to build a fund for the settlement.
The next risk with debt settlements is that they will lower your credit score. This is particularly true if you have good or fair credit. If you have bad credit, consider rebuilding your credit before accepting any settlement offer. The average debt settlement is around 48% of the original debt, but if you’re still in the relationship with the original creditor, the amount could be higher.
When negotiating a debt settlement, you can always ask for a better deal. If the settlement doesn’t meet your financial needs, you could even request your creditor to report it as “paid in full.” You’ll want to be prepared with documentation and conduct negotiations in writing. Remember, you have seven years to negotiate a debt settlement before the statute of limitations expires.
It’s important to remember that a debt settlement process can last years if you are not careful. Make sure to build a war chest of cash to cover any unexpected expenses if you can’t afford your payments. Debt settlement companies can sometimes accept deposits that you can make monthly or in large amounts. Just remember that your credit rating will be damaged if you don’t pay your creditors.
Debt settlement offers are often the best option for people with large amounts of debt. While a debt settlement isn’t for everyone, it is a good option for those who can afford a large payment. It’s best to make several settlement offers of the same percentage of total debt.
Debt Settlement Pitfalls – How to Negotiate a Debt Settlement Offer was first seen on Help with My Debt