How to Negotiate Your Personal Debts

Proper Planning is Key

If you’re saddled with mounting debt, a good plan and proper negotiating skills are key to achieving financial freedom. Proper planning and negotiating is key. Without a well thought out plan, you are less likely to succeed. First, sit down and calculate all of your debt so you have a clear understanding of the numbers with which you are dealing. Be sure to include everything.  Go through all of the unopened mail you’ve been avoiding so you have a clear understanding of exactly what you owe.

How to Negotiate Your Personal Debts

Start with that Magic Number: Your Credit Score

Next, request a copy of your credit score. There are several internet sites that offer a onetime free credit score to individuals. Once you’ve obtained a copy, review it and question any discrepancies by calling the companies or credit collection agencies that claim you own unresolved bills. Sometimes information listed is inaccurate or outdated. Once you know what bills you owe and your credit score and have calculated your monthly income intake, it’s time to put your negotiating skills to use. This gives you a sense of control and shows creditors you have a plan. People are generally willing to help and work with you, as long as they see you are making a concerted effort.

Seek Guidance from Family and Friends First

Check with family and friends first, to see if they might be able to help by extending you a temporary loan. Make certain you have everything in writing and signed. Also, offer to pay interest. They probably won’t accept it, however it is a sign of good faith.

When it’s Right to “Settle”

The next least expensive method is to call the people to whom you owe the debt, one by one. Do not send email. Ask to speak directly to a person who is familiar with your account. Explain your situation and offer to make payments (most companies will set up an automatic withdrawal from your checking or debit account). If you simply cannot afford to pay the entire debt, ask if they will accept a settlement amount. This means is you pay them a certain percentage of the debt and they forgive the remainder. This is an option, however, beware this will appear on your credit score as settled vs. resolved, and may affect your ability to obtain future credit.

Debt Consolidation Companies Offer Efficiency

Finally, you may want to consider a debt consolidation company, however, this is your most expensive route. In essence, all of your debt is accumulated and paid by the consolidation company, and you pay them a monthly fee.  It sounds appealing, however if you choose this route, double check interest rates, finance  charges, etc.  They do have experience with debtors, so while it is wise to proceed with caution, it may also be a more efficient and less complex approach toward paying down your debt.

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