Debt negotiation can be a good path to debt relief as it represents the only way to get debts reduced. Some people have negotiated their debts down to as little as forty or even fifty cents on the dollar. Professional debt negotiation companies can often do as well or better although they do charge for their services. This means you would save less than if you were to handle the negotiations yourself.

Of course, before you jump into debt negotiation it’s important to understand what it’s all about. So, can you correctly answer at least five of the following six questions?

1. Which debts can be negotiated?

A. Auto loans
B. Credit card debts
C. Federal student loan debts

2. DIY debt negotiation requires:

A. The cash required to make lump-sum payments
B. Strong negotiating skills
C. The ability to make your minimum payments

3. How much does DIY debt settlement cost?

A.Usually about $1000
B. Nothing
C. A flat fee of $500

4. I would be a good candidate for debt negotiation because:

A. I have $20,000 in credit card debt
B. A high credit score
C. I can’t even make my minimum payments

5. A reputable debt negotiation company will never:

A. Charge an upfront fee
B. Contact you first
C. Fail to provide an estimate of about how much money you will save

6. Debt negotiation and your credit:

A. Debt negotiation will have little or no effect on my credit
B. Debt negotiation will have a positive effect on my credit
C. Debt negotiation will have a negative effect on my credit

The answers

1. Which of these debts can be negotiated?

The answer to this is B. Credit card debts can be negotiated because they are unsecured debts. Auto loans are secured debts and can’t be negotiated. While federal student loan debts are unsecured debts, they cannot be negotiated due to federal law.

2. DIY debt negotiation requires:

Both A. and B. are correct. If you choose DIY debt negotiation, you’ll need to be able to offer lump sum payments to settle your debts. Otherwise, lenders won’t negotiate with you. Strong negotiating skills are also required in DIY debt negotiation because your opponents will be skilled and tough negotiators.

3. How much does DIY debt negotiation cost?

If you answered C or Nothing, go to the head of the class. Negotiating your own settlements doesn’t cost anything because you do all the work. You will need to contact each of your lenders, find someone with the authority to negotiate with you, and then make your initial offer. It’s unlikely it will be accepted so you can expect a lot of back-and-forth before you arrive at a number that’s acceptable to both you and the lender. In short, DIY debt negotiation can be complicated and time-consuming.

4. I would be a good candidate for debt negotiation because:

The answer to this question is C — that you can’t make even your minimum payments. The fact that you owe $20,000 in credit card debt doesn’t make any difference if you can make the minimum payments. And mortgage payments can’t be negotiated.

5. A reputable debt negotiation company will never:

This one is a little tricky because the answer is all of the above. No reputable debt negotiation company will ask you to pay an upfront fee, nor will it contact you first by – or email. In fact, the FTC has made upfront fees illegal. A trustworthy debt negotiation company will provide you with an estimate of roughly how much money it can save you, as well as how long it will take to settle your debts.

6. Debt negotiation and your credit:

Did you answer C, that debt negotiation will have a negative effect on your credit? Then, you are correct. Debt negotiation will negatively impact your credit two ways. First, it will drop your credit score dramatically. Second, if your lenders report your debts to the credit bureaus as settled, they will stay on your credit reports for seven years. Lenders will see you failed to pay back your debts in full and will be less likely to grant you credit.

In conclusion

Were you able to correctly answer at least five of these six questions? Then, debt negotiation could be for you. But if you were unable to answer most of them correctly, you need to do some homework before choosing this option. If not, you might end up in more trouble than before you chose it.

Did you know you can negotiate with most lenders? It’s true and it’s becoming more popular. In fact, you can negotiate with most of your lenders, especially banks and credit card companies. This is because loans from these lenders are unsecured. If you default on a credit card debt or personal loan, there’s nothing these lenders could repossess. Their only options would be to sue you or to sell your debt to a debt collector.

How to know when the time has come to negotiate

If you’ve slashed your spending to the bone and still can’t keep up with your bills, the time may have come to bite the bullet and begin contacting your lenders. One hundred percent of them won’t agree to negotiate with you. However, if you contact them early on – as soon as you realize you can’t keep up with your bills – most of your creditors will agree to work with you.

Four things that can be negotiated

It’s usually possible to negotiate to get your interest rates reduced, to have your payments waived for a few months, to make interest-only loans for a few months, or to settle the debt. Of these four options, debt settlement has become the most popular because it’s only way to pay off debts for less than their balances.

Getting prepared

Successful debt negotiation begins with upfront planning and organization. Both are essential for success.

Your first step should be to make a detailed list of your debts. You could do this with a pencil and a piece of paper or with a free spreadsheet program like Google Sheets. Your list should include the names of your lenders, your outstanding balances, their interest rates and your monthly payments.

Next, you need to decide which of your debts you believe you can negotiate and what you want from each of your lenders. For example, in one case your objective could be to settle a credit card debt, while another might be to make interest-only payments on a personal loan.

Your third step should be to review your budget or create one. Having a budget is the only way to know how much money you have available to repay your debts. If you’re creating a budget for the first time, you’ll need to find ways to keep your spending to the absolute minimum.

Deciding which debts to tackle first

It’s important to understand that all debts are not created equal. Some are high-priority debts because they’re secured debts. This could include your home mortgage, past-due rent, and auto loan(s). Next, on your list should be low-priority debts like your credit card debts, personal loans, personal lines of credit and medical bills. You won’t need to address them until you’ve first dealt with your high-priority debts.

The basic strategies

Here are some basic strategies that can improve your chances of negotiating better deals with your creditors.

The first is to never put all your cards on the table. If you’re telling a lender how much you can afford to pay each month, the number of months you want to make interest-only payments, or how much you could pay to settle the debt, always hold something back. That way you’ll have room to negotiate. If you’re lucky, the lender will accept your initial offer. However, the chances of this are slim. What’s more likely is that you’ll get a counter offer. You could then respond with a counter to the counter or accept the lender’s offer. In either case, you’d end up better off financially than you are now.

Second, understand that for the negotiation to be successful, both of you have to get something. For example, if your goal is to get your interest rate reduced, you might offer to extend the length of the loan. Of course, your objective should be to give as little as possible in exchange for getting as much as you can.

You need to also understand who has the edge in the negotiations. This is because whoever has the edge will have the stronger bargaining position. In most cases, this will be your lenders, and this is absolutely true when it comes to secured debts. If you can’t negotiate a deal with them, they could take away your collateral.

Finally, hold your temper. Don’t allow yourself to get angry, confrontational, or be demanding. If you do this, your lender may simply stop negotiating. If you get to the point where you feel you’re about to lose your cool, end the discussion, and then call back after you’ve had a chance to calm down.

In conclusion

If you’re behind on your bills, don’t let it get to the point where your only option would be bankruptcy. Use the information you’ve read in this article to contact and negotiate with your lenders to get better deals, making it easier to repay your debts. If you don’t feel up to negotiating with your creditors yourself, hire an attorney or go to a non-profit consumer credit counseling agency for help.

Are you considering debt negotiation? Then you should know that there are several things you can negotiate with lenders. For one thing, you could negotiate to get your interest rates reduced. If you have high-interest credit card debts at 18% or above you might be able to negotiate them down to, say, 12%, which would mean much lower monthly payments.

Two other options

A second thing you could negotiate is to have your payments waived for several months. While this would not do anything to reduce your debts it would at least give you a sort of “timeout” to get them organized and to develop a plan for repaying them.

One of the least known things that can be negotiated is to have your monthly payments converted into a payment plan where you’d have a fixed monthly payment and a fixed term. The biggest benefit of this is that you would know exactly when you’ll be out of debt.

The fourth option

The fourth thing that can be negotiated is debt settlement. It’s where you negotiate with your lenders to pay off your balances for less than you owe. As an example of this you might be able to negotiate a $5000 debt down to $2500. However, there is a caveat here, which is that you’d need to have the $2500 available to send to that lender immediately. Why is this? It’s because that’s one of the biggest reasons – if not the biggest reason – why a lender would agree to settle with you.

Do you have the skills?

If you think your best option is debt settlement, you need to ask yourself the question, do I really have what it takes to be a good negotiator. You’ll be negotiating with people who have a ton of experience and whose goal in life is not to give their companies’ money away. In other words, you’ll be facing very tough and experienced negotiators – men and women who spend their entire days negotiating with people like you.

The secret

There is a secret to negotiating with your lenders. It’s that you must have a “story” or reason why they should negotiate with you. That reason could be you just went through a very costly divorce, you lost your job, you were required to take a big cut in pay, you had a terrible medical emergency or you suffered some other dire problem that makes it impossible for you to pay your debt in full. You should also have documentation ready to prove your financial emergency because your lenders may require it.

If you don’t have good negotiating skills

If you’re like most of us and have little or no experience in negotiating, the good news is there are books you could buy that will teach you what you need to know to go face-to-face with your lenders. The top-rated one of these is Negotiate and Settle Your Debts: A Debt Settlement Strategy. It was written by Mandy Akridge and gets 4 1/2 stars on Amazon.com. The book costs $14.79 in paperback and $9.79 as a Kindle edition. As the author notes, this is a very inexpensive way to get the skills you’ll need to negotiate and settle your credit card debts. One buyer wrote, “I currently have offers to settle between 30%-50% on my account but using the counter settlement letters (included in the book) to get closer to 20% settlements”.

A second book that’s received four stars on Amazon is Enough is Enough: The DIY Debt Settlement Guide Your Creditors Don’t Want You to Know About. If you qualify for Kindle unlimited you can get this book free. if not, it costs $8.98 and can be read on any device. The author, Richard Cooper, is a debt settlement expert and an insider in the collection industry. One of the book’s readers wrote in his review, “… it provides invaluable advise and tips to address your debt situation without over-complication the process”.

Negotiating is negotiating

While these two books focus on debt negotiation the fact is that there are other books on negotiation in general that could also help– because after all negotiating is negotiating. The top-rated book in this category is Getting More, subtitled How You Can Negotiate to Succeed in Work and Life. Another popular one is Crucial ranks in Conversations subtitled Tools for Talking When Stakes Are High by Kerry Patterson, Joseph Grenny, Ron McMillan, and Al Switzler. The third is Persuasion by Robert B. Cialdini, which is more about the psychology of sales negotiations, but does provide information that could be useful in debt negotiation. And, finally, there is the very popular Getting to Yes, subtitled Negotiating Agreement Without Giving In, which many say is the most influential book on negotiating ever written.

There’s no question that if you’re setting out to negotiate over thousands of dollars in debts it’s well worth spending $20 or $30 to buy a couple of these books so that you’ll know how to negotiate the best possible settlements.

If you’re up to your neck in debt, then debt negotiation can be a good way to reduce it and get some relief from any lenders that are constantly nagging you and even from annoying debt collectors. But it’s just as important to know what not to do when negotiating with your lenders as what to do – because the more you know the more successful you will be.

There are common mistakes that many people make in debt negotiation that you need to avoid – to maximize your chances for success – and here are seven of them.

1. Not knowing if your debt is secured or unsecured

There are basically two types of creditors – secured and unsecured. Your secured creditors are those where you were required to use some sort of asset such as your car, house, boat or land to secure the loan. If you fail to pay on one of these loans your creditor could then seize your asset.

Your unsecured creditors are those where you were allowed to purchase something without providing an assert as security. The biggest example of this is credit card debt. Others include department store cards, personal loans, personal lines of credit, peer-to-peer loans and gas cards.

2. Failing to understand your creditors’ strengths

A secured creditor is in a better position of strength because it could repossess one of your assets – your automobile or some other valuable property. While unsecured creditors can’t seize any of your belongings there are other things they can do. For example, they can harass you by calling constantly or they can sue you for breach of contract. If they sue and win they could garnish your wages or levy (take money out of) your bank accounts. If you’re sued by a creditor who wins a judgment against you make sure you protect your money by getting your bank balances as low as possible and stopping any direct deposits.

3. Not knowing their weak points

Whether the creditor is secured or unsecured it has certain weaknesses that you may be able to take advantage of. For instance, debt collectors are subject to the rules and regulations of the Fair Debt Collection Practices Act (FDCPA), which limits what they can do to collect from you. Creditors are not subject to the same rules and regulations but many states have laws that limit what they can do. If you’re being threatened by your creditors contact your state’s attorney general’s office to learn your rights.

Another weak point is that it’s expensive to sue. A lawsuit is generally a last resort for a creditor because of the money and time it requires. Plus, lenders are not guaranteed a successful outcome – that they will actually recover any money.

4. Failing to understand that cash is king

When it comes to settling a debt cash is king. You should be able to settle faster and for a lower amount if you can immediately transfer funds to the creditor. However, it’s important to avoid these pitfalls:

• Paying an unsecured debt with secured property such as getting a home equity loan to pay off a credit card debt. If you were to do this and then have problems making payments on the loan your house would be at risk. Ditto car equity loans.

• Using your retirement funds to pay off the debt. If you withdraw money from a 401(k) or a traditional or Roth IRA, you will probably be required to pay a hefty tax and even a penalty – unless you pay back the money within a certain amount of time.

5. Paying too much

It’s usually possible to settle debts for pennies on the dollar. When you’re negotiating with a creditor make sure you start low with the goal of settling the debt for 50% or less of what you owe. But again you’ll need to have the cash available to send to the lender. Very few of them will agree to a settlement like this unless they can get paid immediately.

6. Not writing everything down

While creditors won’t lie to you they can give you conflicting information. This can be especially true if you talk to several different customer service representatives at the same company. Whenever you talk with one of these people make sure you take very detailed notes with the name of the person you spoke to, the date of the phone call, and all details of the negotiations. If you are able to reach a settlement, ask the creditor to send you a letter or email spelling out what was agreed on, the date, the name of the customer service rep and the amount that was negotiated.

7. Failing to understand the big picture

Before you start any debt negotiations take a look at the total amount of your debt and then ask yourself would you really be able to pay one-half of it. The sad fact is that many debtors end all having to file for bankruptcy protection even after they’ve paid thousands of dollars to settle some their debts. If you don’t think you would be able to pay that one half then, instead of negotiating directly with your creditors, hire a professional debt settlement company or, worst case, file for bankruptcy.

Did you know just anything can be negotiated? At least you can try to negotiate anything. Of course, in some cases it won’t work but remember the old saying, “nothing ventured, nothing gained”. If you try to negotiate something and are turned down all you’ve lost is less than 60 seconds of your time. But if the seller agrees to negotiate you may save a lot of money.

Even debt can be negotiated

It’s probably never occurred to you that you could negotiate with your lenders. If you’re typical you probably think that if you owe a credit card company $1800, that’s it. You owe the $1800 and the only issue is how you will you pay it off.

The fact is that you can negotiate with almost any lender. For example, you might not be able to negotiate that $1800 credit card bill down to, say, $1200 but you could negotiate to get its interest rate reduced, which would certainly save you money and help you repay the debt faster.

Here are nine tips for negotiating with lenders.

Negotiating with lenders in general

Regardless of the lender or type of debt you want to negotiate, you need to lead with the threat that you may soon have to file for bankruptcy. This will almost always lead to a better settlement offer. This is especially true in the case of unsecured debt such as medical debts, payday loans and personal lines of credit. The reason for this is that if you were to file a Chapter 7 bankruptcy your unsecured creditors would get nothing. They understand this and, as a result, would rather settle your debt for less than you owe instead of ending up with nothing should you were to file for bankruptcy.

What to aim for

You should try to negotiate any debt down to 50% or less. It may take some effort and a good deal of patience to get there but most unsecured creditors will end up settling for 40% to 50% of your balance. This means you should begin by making a very low offer such as 15% and then begin negotiations from there.

You will need to have the money on hand

Lenders are more likely to accept your settlement offers if you can transfer the money to them immediately. This means you will need to amass an amount of money before you begin negotiations so that you can offer to transfer the funds immediately. If you can do this, it’s very likely that you’ll be able to get a better settlement. There’s also the old saying, “a bird in hand is worth two in the bush”, and many creditors will accept an offer today instead of having to wait for multiple payments over a long period of time.

Understand the big picture

When you negotiate with the lender understand that you will not be able to eliminate any debt entirely. Your goal should be to get the debt reduced to the point where you can pay it off in a decent amount of time. If you are unable to do this, then you won’t be in any better a position than before you began negotiating.

Negotiating with a mortgage company

You may not be able to negotiate with your mortgage lender to get you debt reduced but you might be able to get your loan modified or take advantage of programs such as the Home Affordable Refinance Program (HARP). However, negotiating with mortgage lenders is usually very tough. You may be required to complete and submit lengthy, multi-page documents and provide the same information over and over again.

Secured loans

You can probably negotiate boat, car, motorcycle and other secured loans if the loan came from a local bank. Your negotiation process here should be about the same – threaten bankruptcy, have money on hand to make any payment you’re able to negotiate and never forget the big picture.

Negotiating student loans

It’s almost impossible to negotiate student loans because they cannot be discharged through a bankruptcy. Fortunately, there are government programs available that would allow you to lower your monthly payments, delay paying off you loans or even get them canceled.

Negotiating with your credit card issuers

These are generally the easiest debts to negotiate. Just use the general negotiation strategies you have already read. But it may take some time and patience to get to a good settlement amount.

Unsecured bank loans

You would use the same strategies for negotiating an unsecured bank loan as with credit cards. Be aware of the fact that the laws that regulate banks and those that regulate credit unions are not the same. While you should use the same debt negotiation tips for each, it’s possible that the credit union has cross-collateralized your loan, which would make it tougher for you to get a settlement for that 50% or less.