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.