Money » Get Out Of Debt » Can I Negotiate A Debt Settlement On My Own?
Advertiser Disclosure

This website is an independent, advertising-supported comparison service. The product offers that appear on this site are from companies from which this website receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). This website does not include all card companies or all card offers available in the marketplace. This website may use other proprietary factors to impact card offer listings on the website such as consumer selection or the likelihood of the applicant’s credit approval.

This allows us to maintain a full-time, editorial staff and work with finance experts you know and trust. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impacts any of the editorial content on The Smart Investor. While we work hard to provide accurate and up to date information that we think you will find relevant, The Smart Investor does not and cannot guarantee that any information provided is complete and makes no representations or warranties in connection thereto, nor to the accuracy or applicability thereof.

Learn more about how we review products and read our advertiser disclosure for how we make money. All products are presented without warranty.

Can I Negotiate A Debt Settlement On My Own?

Anyone who is getting calls from creditors and debt collectors knows that they definitely don’t feel like actually talking with them about it. But the truth is that it's definitely possible. Here's how it works and the best tips for negotiating with creditors.
Can I Negotiate A Debt Settlement On My Own

The truth is, if you’re dealing with a debt collector they don’t actually need to make much off you in order to get the kind of profit they want. That’s because they paid pennies on a dollar to get that debt. That means they’re pretty likely to agree to settle on a lower price. Even a creditor is more likely to deal with you because they don’t really want to write off the debt.

Negotiate With Your Collectors – How It Works

When you’re working on negotiations there isn’t going to be a one-size-fits-all approach. There are several different ways to go about it. You could try to lower your payment or to defer your payments. Maybe they would be willing to restructure the loan or waive late fees or penalties or maybe they would be willing to lower the interest. Any of these could make it more possible for you to actually pay off your debts.

When it comes to the payments themselves you may be able to set up a new payment plan that will work better for you. Or maybe you can create a settlement to pay off the debt for a lower amount. All of these things are going to depend on what you’re able to do when it comes to making payments and of course on your current situation with the creditor and what you can work out with them.

Just remember that a creditor is going to want to get their money back, but they are bound by the law when it comes to just how they can do it. They might not always be friendly and in fact they can be downright rude or obnoxious when you interact with them. They’re not necessarily used to people who actually want to make things right. They usually work with people who don’t want to pay.

For you, it’s important that you pay attention to what’s best for you while still working out the best thing to do financially and legally. They’re not going to have your best interests at heart when you try to negotiate so don’t let them talk you into anything. Also, keep in mind that they’re not likely to be swayed by your story. They just want to get their money.

One more thing: while you are trying to negotiate your debt, it's super important to make sure you're doing everything to eliminate your debt by making actual steps to get our of your debt. You can start reading about dave-Ramsey 7 money traits to become debt free that gives you great tips about your day to day habits, You can also consider the debt avalanche or the debt snowball methods.

How to Improve Your Negotiation Strategy?

If you’re trying to negotiate on any kind of debt it’s important to know some basic negotiation strategies and understand who is the company you are dealing with.  You need to know the right techniques and skills to make you more successful, and here are several that you should be looking at:

Set Your Goals

Think about the amount of money that it’s possible for you to pay and look at your bills. If you can’t afford to pay the bills and pay that same amount on your debt that’s not going to work for you.

Create an outline of everything that you have coming in per month and everything that you have going out. Make sure that you have a little bit of money left at the end of the month to cover any additional expenses and more. If you want to work with a credit counselor through a nonprofit you’ll be able to get more assistance. Just make sure you’re watching out for a company that claims to renegotiate or settle your debt.

Think about how much you’re willing and able to spend on the debt. Whether it’s a lump sum or it’s a set amount of payments you want to make sure you’re not pushing yourself too far on what you can spend.

Think about the options that are actually available to you, like:

  • Payments that provide for you paying off what you owe right now without adding in new fees or interest
  • Payment in full that’s actually lower than the total balance due
  • Removing the negative information from a credit report or reporting positive information to the credit report
  • Lowering the interest or waiving the current interest
  • Waiving legal fees, late fees or penalties

Know What You’re Able to Pay

When you offer a settlement the first thing you need to know is how much you can actually pay.

When you look at your money coming in and money going out it’s important that you make a very realistic offer for payment. You need to pay attention to what you can really do and you definitely want to make sure you negotiate as best you can. If you can make a lump-sum payment and just absolve the debt in one shot you’re definitely going to have a better shot at it.

If you’re able to make a single payment of $7,000 when your total debt is $12,000 you’ll have a better chance than if you have to make payments. You’ll possibly have the chance to completely absolve the debt for this lower amount with the collector canceling out the rest of the money owed.

You want to make sure that you’re also making an offer rather than asking what the creditor is willing to take as a settlement. Plus, you want to avoid allowing them to take any electronic payments or post-dated checks.

Use The Bankruptcy

If you tell a creditor that you’re thinking about bankruptcy or that you may need to file bankruptcy you may be able to get a creditor to accept an even lower settlement about.

After all, in most bankruptcies, Chapter 7 or Chapter 13, most debts will be discharged, which means that a credit card company is not going to get anything at all. Since they know that, they’d rather get something from you than get absolutely nothing when you actually file bankruptcy. However, such a step can be disastrous for your credit score.

Get a Counter-Offer

If you do make a settlement offer and the creditor refuses it make sure you ask them to come back with something else.

If you ask for a counter it lets them know that you’re not willing to just accept what they say without making another offer. It’s going to show that you’re really dedicated to the process of negotiations.

Know What You’re Entitled To

You have specific rights as a customer, so you want to make sure that you know what those rights are. If you don’t you could end up being taken advantage of by a creditor or a debt collector.

Make sure you look at the FDCPA and their provisions. This will lay out what a debt collector can do when they’re trying to collect payment. If they violate these rules and provisions you could file action against them. Just make sure you don’t give out any kind of personal information.

If you do have a problem with a collector make sure you let your state attorney general, the Federal Trade Commission or even the Consumer Financial Protection Bureau know about it.

Make the Lowest Offer Possible

If a collection agency just purchased your debt from the creditor they don’t need you to pay much in order to make a profit. They generally paid pennies on a dollar in order to get it and that means they don’t need anywhere near the actual debt total in order to make their profit. That’s why they tell you that you can make a full payment of something less than the original debt.

If you want to make an offer start it out with something very low, like only 10% of the actual amount that’s owed. It might be something like $500 on a $5,000 debt.

Offer Quick Payments

A creditor is going to want to get their payment as quickly as possible. If you’re able to get the money together before you even start trying to negotiate you’re going to be in a better place. You have the ability to transfer funds immediately and the creditor is definitely going to like that idea. It might make them more willing to accept a low offer because you have cash today instead of making payments gradually.

Get it in Writing

If you make an agreement with a debt collector make sure that you get all the details in writing. You definitely don’t want to make a payment to them that you expect to absolve the debt and they don’t do it.

Be sure that you get the agreement written down before you make a payment and then make sure that you have a copy of everything for yourself. Also, make sure that you have proof of your payment in case there’s any question later on.

Consider a Credit Counselor

If you can’t negotiate your payment you may want to look into hiring a credit counselor to help you out. That counselor may be able to help with negotiation as well as debt settlement, plus you’re going to have the possibility of reducing or eliminating your debt.