7 Tips For The Do-It-Yourself Debt Manager


For many people, admitting that they have a debt problem is as far as they want to go. After that, it's time to pass the baton to a professional debt counselor or credit repair company. For others, control is the key. If you are a hands-on type who understands financial issues, it's possible to tackle your debt challenges yourself - and you might even save a little money. Here are seven tips if you decide to go at it alone. (To get started, check out Digging Out Of Personal Debt.)

1. Put Some Money On The Table

Your lenders may want at least 50% of your overall loan up front (although that figure is negotiable). Note that some creditors won't even begin to negotiate until they receive some money from you, so be ready to put up some cash to prove that you're serious about getting out of debt.

2. Expect A Fight

Most creditors have agents or customer service reps to handle some debt negotiations. But at some point be prepared to see a lawyer get involved who is representing the creditor. Usually, there has to be a substantial amount of debt before this happens.

3. Send A Money Order

When you make a payment to your creditor with a credit card or bank account, you will be providing all of your pertinent banking information in the process. What's the problem? If you are sued, it's simple for the creditor to get at your funds through your bank account. So, make sure you pay with a money order.

4. Seek "Paid In Full" Status

Creditors will usually settle for less on the dollar so they can guarantee they at least get something back. This means you can expect to pay less if you agree to a lump-sum payment. However, you should also demand that the debt be shown as "paid" on your credit report. "Fully paid" or "debt satisfied" is the language you're looking for. "Debt still active" is not what you want. It never hurts to ask.

5. Bring A Lawyer

If negotiations go nowhere or if either party fails to live up to their end of the bargain, the lawsuits can start to fly. Being prepared for this will work to your advantage, so make sure you have a lawyer ready to go to bat for you if the mud starts to fly.

6. Be Realistic

You might be tempted to back down a bit and accept a repayment deal that is still too much for you. This is a mistake. Don't agree to any debt payment plan that you can't manage. Be honest. Tell them what you are willing to pay, and let them know if they demand more you could be forced into bankruptcy (in which case they will receive no payback at all).

7. Discover Your Creditor's Limits

If a creditor offers three months at no interest, ask for six. Always aim high and understand how much negotiating room you have to work with within your personal budget. Remember, the worst they can say is no.

Give It A Try

If you have the time, the expertise and the detail-oriented demeanor of a professional debt manager, settling your own debts might be a good strategy for you. Try starting off with a manageable 90-day trial period. If you've made solid inroads within that time and have negotiated your debt downward and your credit score upward, keep at it. If not, then it's time to call in a professional.
Related Articles
  1. Budgeting

    Key Questions to Ask Before Moving in Together

    Moving in together is a big step. Here are some key financial questions to ask your partner before you make the move.
  2. Budgeting

    Best 5 Money-Saving Tips to Get out of Debt

    Understand the different types of debt and the reasons why people get into debt. Learn about five tips to follow to get out of debt.
  3. Credit & Loans

    Your Credit Score: More Important Than You Know

    Credit scores affect key aspects of your personal and professional life. Knowing your score and managing your credit input can make a big difference.
  4. Economics

    Understanding Bad Debt

    Bad debt is money a company or lender is owed, but is unable to collect.
  5. Credit & Loans

    Bad Credit? You Can Still Get a Home Equity Loan

    If your credit history is less than stellar and you need cash, you may be able to get financing – but it will come at a price.
  6. Investing

    Why You May Not Need an Emergency Fund

    Emergency funds are considered mandatory by most financial-planning experts, but they can be expensive to hold and ultimately unnecessary.
  7. Credit & Loans

    Find the Right Reverse Mortgage Counseling Agency

    How to hook up with a counselor who can help you make the right decision about this trickiest of financing vehicles.
  8. Credit & Loans

    Does a Lost or Stolen Credit Card Hurt Your Credit Score?

    Learn the ways in which a lost or stolen credit card can hurt your credit, and understand the steps you can take to protect yourself if this happens.
  9. Economics

    What Happens in a Default?

    Borrowers are in default when they don’t honor a debt, whether their failure is intentional or not.
  10. Credit & Loans

    5 Signs a Reverse Mortgage Is a Bad Idea

    Here are the key situations when you should probably pass on this type of home loan.

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!