Negotiating Debt for Faster Credit Repair

You're in over your head with debt, but you either can't or aren't willing to file for bankruptcy. If you've been making the minimum payments towards your debts, but you feel like you're getting nowhere, you might want to try negotiating with your creditors in order to reduce the amounts you owe.

Basic Debt Negotiation

The first creditors you will want to approach are those to whom you owe the least. You will be able to pay them off more quickly, which will give you a feeling of accomplishment and encourage you to continue on with the rest of them. Tell the creditor how much you can afford to pay - don't ask them what they will accept.

Do NOT negotiate with the debt collector; only talk to the original creditor. Debt collectors want to get as much money out of you as they can because they get a percentage of the amount actually collected. Creditors and debt collectors also threaten litigation as part of their scare tactics. Don't worry about it at this point. As long as you are making efforts to settle, they won't waste the money to pursue you in court.

Be honest with yourself and your creditors. We all want to pay what we owe, but your paycheck will only stretch so far. It's better to offer the minimum you can afford to pay each creditor than robbing from Peter to pay Paul. That's probably what got you into this financial mess in the first place.

If a creditor is reluctant to negotiate, don't give up. Wait for a month or two and try again. As time passes, the creditor may come to the conclusion that some money is better than no money. Mention that it's in their best interests to settle with you because they will avoid the expense of collection agencies and litigation.

Don't be rude, even if you start to get frustrated. Creditors have to deal with a lot of angry, difficult people, so if you're a breath of fresh air, they'll be more helpful to you.

Using a Debt Negotiation Company

When you use a company that specializes in debt negotiation, you will usually pay a monthly fee to that company, which will then use the money you're paying to negotiate a lower payoff amount with your creditors. While you are using this service, your credit score is lower, but your creditors are usually required to post your account as "paid in full" on the credit report. This means that once you're out of the debt negotiation program, your credit score will rise. Sometimes the debt negotiation company will offer to repair your credit report as well, for an additional fee.

On the other hand, some companies charge exorbitant fees for their negotiation services, so you will definitely want to do your homework if you decide to use a debt negotiation service.