While there are many companies that specialize in assisting consumers with reducing and eliminating debt, some people prefer to settle their own debts. With adequate time and information, many consumers will find that negotiating their own debts is preferable to paying a third party to do it for them.
When a consumer decides to attempt to settle their debts on their own, they do a lot of the same things as a professional debt settlement company, they just do them without any assistance. This typically involves calling creditors and negotiating interest rates, monthly payments, and total amounts due.
Consumers who wish to engage in do it yourself debt settlement must take the time to learn basic information regarding debt settlement options. They also have to gather financial information and create a plan to contact and negotiate with each individual creditor.
Negotiating With Creditors
It pays to do your homework before negotiating with creditors. When negotiating, you have two main options available to you. You can attempt to attain a lower interest rate, to reduce your total balance, or both. If you aren’t behind on payments, negotiating your interest rate may be the best option available to you. If you’ve fallen behind on payments, you may be able to reduce the amount that the creditor will accept as full payment and lower your interest rate at the same time.
Many creditors will accept a portion of the total amount due as full payment because once a customer has fallen behind on their payments, the amount owed it often written off as bad debt anyway. This means that the company has made the assumption that they will never collect on any of the money owed. That means that they believe collecting a portion of what’s owed is better than collecting nothing at all. Decide before calling how much of the total debt you’d like to pay. This will be your starting point when you negotiate. If you come to an agreement regarding the amount that you’ll pay, ask to receive the agreement in writing before making any payments. Doing so will ensure that the person you spoke to had the authority to make the agreement and will also protect you from future collection efforts once you’ve paid the agreed upon amount.
Don’t be afraid to ask to speak to someone with more authority. When you initially call to discuss debt, chances are you’re speaking to a call center employee who doesn’t hold a lot of negotiating power. Request to speak to a manager and continue to request to do so until you are able to speak to someone who has the power to help you adjust your debt.
Pros and Cons of Do It Yourself Debt Settlement
The biggest advantage to doing it yourself is the potential cost savings. Anytime that you utilize a third party to help you settle your debts, you’ll be paying something for their service. It’s hard to take on more debt when you are trying to eliminate the debt that you already have. Doing it yourself can keep more money in your pocket.
Another advantage do doing it yourself is that it puts the power in your hands. You’re able to negotiate with creditors until you reach an agreement that’s acceptable to you. You aren’t stuck with the deal that the debt service agency strikes and you can continue to negotiate until you get what you want.
However, there are some cons to doing it yourself as well. Preparing for and talking to each company you owe money to is a time consuming process. For some people, there simply aren’t enough hours in the day to do it on their own. If this is the case, it’s often better to hire a company that specializes in debt settlement.
Another potential con to do it yourself debt settlement is that you probably don’t have the expertise that a professional debt settlement company has, and you certainly don’t have the connections that a good company will have. Companies that specialize in debt settlement form relationships with many creditors and these relationships, along with the amount of business that they do, gives them a good amount of bargaining power. They may be able to negotiate better deals than you could on your own, making their fees worthwhile to pay.
While there are definitely advantages and disadvantages to both routes, only you can decide what is the best option for you unique situation.
Additional Resources
There are many resources online for people who are interested in do it yourself debt settlement. There are numerous free guides available online that can assist in consumer debt settlement. Government websites even offer tips for consumers who are trying to dig out of debt.
There are also a wide variety of books available on debt settlement and money management. It’s smart to take the time to study how to settle and manage debt before attempting to do it on your own. Read a few good books and learn the ins and outs of debt settlement. It’s also worthwhile to take some time to learn how to better manage your debt in the future so you don’t end up in the same predicament again down the road.
