Have you seen any of those ads titled, “Get Out of Debt today,” “Get Out of Debt Fast, or “ Debt Relief Now!”?

Those ads probably seemed very inviting. I mean, who wouldn’t want to get out of debt fast?

These ads are promoting a debt consolidation option called debt negotiation or debt settlement. Yes, this can be a way out of debt, but it’s important to know what’s true about it and what isn’t. A lot of half truths and outright lies exist about debt negotiation, and here are five you need to be aware of before choosing it.

1. You can get credit card debts reduced just by asking

This would come under the category of total lie. No credit card company will agree to settle a debt just because you ask. You need to be having a serious financial emergency. What’s a serious financial emergency? It could be that you just went through a divorce and got stuck with all the debts, had an expensive hospital stay, or lost your job. You may be asked to document that emergency, so be prepared with the appropriate paperwork. The thing is credit card companies just don’t want to settle unless there’s a good reason, which would be that serious financial emergency.

2. Debt settlement will not damage my credit score

Here’s another one in the category of outright lies. Debt settlement will definitely damage your credit score – maybe by as many as 80 points. It will also have a long-term effect as those settlements will stay in your credit reports for seven years. Lenders will see you settled your debts instead of paying them off in full and will be less likely to offer you credit. Also, credit will cost you more because you’ll be charged higher interest rates.

3. You have to use a debt settlement company

We would call this one a half truth. Nothing says you have to use a debt settlement company. You could settle your debts yourself. But most people choose not to. Two big reasons for this exist. First, using a debt settlement company eliminates the need to save up enough cash to make the lump sum payments required to settle debts. Second, negotiating with credit card companies is tough and takes a lot of time. It’s just much simpler and easier to let a professional debt settlement company handle the negotiations for you. Plus, it’s almost certain a professional settlement company will negotiate better settlements then you could yourself.

4. It doesn’t cost much to use a debt settlement company

This one falls in kind of a gray area. It’s not a total lie nor is it the total truth. Reputable debt settlement companies usully charge a percentage of the amount of debt being settled. This typically ranges from 15% to 25%. If you owe, say $30,000, you’ll probably be charged the full 25%. This mean yes, it will cost a lot to use a debt settlement company. But suppose you owe $15,000 and are charged the 15%. This would cost you $2250. If the company were to get that debt cut down to $7500, you’d save a total of $5250, so it isn’t really costing a lot to use a debt settlement company.

5. If I don’t settle a debt, it will stay in my credit report forever

We rate this one a half truth. That’s because debts that were settled will stay in your credit reports for seven years but not forever. They will also grow less critical as time goes by. If you did have that $15,000 in debt settled, it would definitely be a black mark for the first several years afterwards. Lenders would see you had settled your debts instead of paying them off in full and would be less likely to give you credit. When you did get new credit it would cost you more in the form of higher interest rates. Four or five years after your settlements they would have less of an impact, especially if you had stayed current on your debts and had not missed any payments during that time.

6. Debt negotiation will get me completely out of debt

We will rate this one a half truth because debt negotiation may get you completely out of debt. The problem is it might not. Unfortunately, some debts just can’t be negotiated. This includes student loan debts, automobile loans, mortgages, and other secured debts. And some lenders simply won’t settle regardless.

In summary

Debt negotiation can definitely be a path out of debt. However, before you sign up with a debt settlement company, it’s important to consider the half-truths and total lies you’ve just read. You should now be in position to make an informed choice as to whether this is for you or you need to find another way to deal with your debts.

No one knows for certain how many people chose debt negotiation last year, but it’s clear that it has become one of the top ways to manage debt. There are two reasons for this. The first is that debt negotiation is the only way to get debts paid off for less than their balances. The second is that it’s a sure way for people to achieve debt relief in just two to four years.

The way debt negotiation works is simple — at least in theory. It’s just contacting a lender and offering a lump sum payment for less than the debt’s balance. If the lender accepts the offer, you send the payment, and the lender treats the debt as paid in full.

If you decide that debt negotiation is for you, there are mistakes people commonly make that you need to avoid.

Not understanding which type of debt you have

There are two types of debt — secured and unsecured. It’s important to understand which type you have. Secured debts are those where you were required to put up some type of collateral to get the loan. The two most common types of secured debt are mortgages and auto loans. These debts cannot be negotiated.

Unsecured debts are where you were not required to put up any collateral. Credit card debts, medical debts and personal lines of credit are all unsecured debts. These debts can be negotiated.

Misunderstanding your creditor’s weaknesses

Whether your debt is secured or unsecured, your lender has weaknesses. The first is that it may be subject to collection laws. For example, if you’re trying to negotiate with a collection agency, it must adhere to rules set down in the Fair Debt Collection Practices Act (FDCPA). While creditors are not subject to this law, many states have similar laws governing debt collection practices.

A second weakness is that it costs a lot of money and time for a creditor to sue you. This is the last resort as creditors know this, plus they could sue and still not collect any money.

Unsecured creditors know if they push too hard you could fill for bankruptcy, and they would then get nothing.

Failing to understand the creditor’s strengths

Secured creditors have the most strength because they could repossess something of value like your automobile.
While unsecured creditors can’t repossess anything, they do have other positions of strength. They can harass you with letters and phone calls and they can sue you for breach of contract. Some will even file suit while you’re negotiating with them. If a creditor files suit and wins, it can garnish your wages and even take money out of your bank accounts.

Using the wrong money

Cash is king in debt negotiation. Creditors are more likely to settle quickly and for less money if you can immediately transfer funds to them. However, don’t use your equity in a secured property to pay off an unsecured debt. For example, you shouldn’t use the equity in your home to pay off credit card debts. Also, don’t use your retirement funds to pay off debts. Do this and you’ll pay a big tax on the money you withdrew, or you’ll need to find some way to pay back the funds very quickly.

Paying more than necessary

Another common mistake made in debt negotiation is paying too much. The secret lenders don’t want you to know is that most unsecured debts are settled for pennies on the dollar. Start your negotiations low with the goal of settling the debt for 50% of its balance. Remember this is an unsecured debt so that the worst the creditor can do is sue you, which it really doesn’t want to do.

Failing to take notes

Debt negotiation usually takes time and is a complicated process. The first customer service representatives you speak with may not have the authority to negotiate with you — regardless of what he or she may say. You could talk with multiple people during the negotiations and even get conflicting information. Always take notes when you talk with a lender. If you can reach a settlement, ask for a letter detailing the amount you will be paying; the customer service representative’s name, email address and phone number (with extension number if appropriate); the date and any other important details. If the customer service rep refuses to provide such a letter, then you must write it yourself, and mail it as registered, return receipt requested.

In conclusion

You could negotiate your debts and save a great deal of money. Just make sure you don’t make any of the common mistakes you’ve read in this article. Understand that lenders have strengths and weaknesses, use the right money, and always take good notes. Do this and it’s almost certain you’ll be successful.

What would you do to get out from under that staggering load of credit card debts? Most people say they’d do almost anything short of committing a crime.

If you feel that you’re drowning in credit card debt, we have kind of good news. It’s possible to negotiate those debts. However, – spoiler alert – it isn’t easy. The credit card issuers aren’t in business to negotiate your debts. Their number one goal is to get paid back every cent you owe. They loan you money via credit cards in good faith – believing you’ll repay them. No bank or credit card issuer is in business to give away money by negotiating debts. That would be a terrible business model.

So, how could you go about negotiating those credit card debts?

It takes three not-so-easy steps.

Step 1: Choose a plan

Don’t even think about contacting one of your credit card companies until you’ve chosen a plan. You have four options.

· Lump sum settlement

· Workout arrangement

· Forbearance program

· Debt management program

· Debt settlement program

There are pros and cons to each of these options. Be cure to research all five before choosing one.

Step 2: List your income and debt

The next step is to take a good hard look at your debt in your income. If you don’t have all your credit card statements, call your credit card companies and ask for a breakdown of your statements. You may find a lot of what you owe is garbage or money you blew in late fees and over limit charges. When you separate these out, you may be shocked to find how much you actually borrowed.

Next, make a list of your income and your spending. You can’t know how much you can realistically afford to pay on your credit card debts until you’ve done this. Break your spending down into two categories – fixed expenses and discretionary spending. Your fixed expenses would include things like your rent or mortgage payment, groceries, insurance premiums, and utilities. These are expenses you must pay first before your credit card debts.

Be sure to build in some wiggle room. If you make your budget too tight, you’re almost sure to fail. Remember that you’ll have expenses that pop up less frequently than weekly or monthly. Your car could need it’s a 3000-mile oil change, your plumbing could back up, or your dog could come down sick. You need to have some emergency money built in your budget to cover these things.

Step 3: Start calling

Now that you know how much you can afford to pay, it’s time to start negotiating. Understand that this will be a marathon and not a 100-yard dash. You’ll probably have to make multiple phone calls to the same credit card company and talk to a bunch of different people. Some of them will even contradict one another. Keep in mind that the credit card companies can and probably will freeze your credit limit after that first phone call.

The first customer service representative you reach will probably not have the authority to negotiate with you – though they may not admit it. Let him or she know you need whatever department handles settlement arrangements, or workout agreements. Every bank and credit card issuer is set up differently, with different department names, policies, and special programs.

When you’re finally able to reach someone with the authority to negotiate with you, write down his or her name and telephone number with an extension. Explain that you need help. Jot down a brief summary of your conversation with the time and date. Keep all of this information together in a notebook.

Be prepared to haggle as this is what negotiating is all about. Begin by summing up your situation. Explain that you’re having a financial emergency. Ask what the credit card company could do or propose your own plan. You may want to use the B word as in bankruptcy. Your ultimate goal should be to get your debts reported as complete, current, and timely.

Last of all, get anything that’s agreed to in writing. This needs to include the fact that the account was paid off (or will be paid off) and when. It also needs to include the amount that will be reported for taxes and what the credit card company will tell the credit bureaus.

In conclusion

Follow the steps you’ve read in this article, and you should be able to negotiate with your credit card companies to get a program that will make it easier for you to repay your debts. Just don’t wait too late to ask for help. You may be well-intentioned but if you don’t take action, you could end up in a financial hole from which you’ll never be able to recover.

What’s this key fact?

It’s simple.

Lenders don’t want to negotiate. Let me say this again. Lenders don’t want to negotiate.

Why should they? They lent you money in good faith, and they expect to be paid back. In full.

The good news

The good news is that most debts can be negotiated. Credit card debts can be negotiated. So, can medical debts, personal lines of credit, and just about any other type of unsecured debt.

Secured debts like mortgages and auto loans can rarely be negotiated. This is a case where the lender definitely has the upper hand. If you default on an auto loan, one of those flatbed tow trucks could show up at 2 AM and take away your car.

Stop paying on your mortgage, and your house could go into foreclosure, which is a way of saying you’d lose it.

How to get a lender to negotiate

So, if lenders don’t want to negotiate, what can you do to motivate them?

You need to be a bit of a salesperson, and sell them on the fact that you’re having a financial emergency.

Your emergency could be that you lost your job, or you had a major illness. It might be that you’ve had a divorce that left you with all of the debts, or you had a death in your family.

The point is that something drastic happened to you, which has made it impossible for you to repay your bills in full.

Lenders are skeptics

The people at banks and credit card companies tend to be skeptics. They’ve heard just about every hard luck story imaginable. Just telling them you’ve had a financial emergency won’t cut it. You’ll probably need to have documentation that proves your emergency.

Were you hit with a serious illness? You should have the bills available that prove how much it cost you. Have you lost your job? Then, you should have something like the letter about your termination or copies of unemployment checks. If your financial problems were caused by a divorce, you might have your divorce decree at hand.

Lead with the B word

Some experts say you can get to negotiating a debt a lot quicker by leading with the B word as in bankruptcy.

For example, you might say, “I’m in such a financial pickle that if you won’t negotiate with me, I’ll have to file for bankruptcy.”

The reason this is such a powerful weapon gets back to that thing about unsecured debts.

If you file for bankruptcy, your unsecured lenders will get nothing as in zip, zilch, nada. And they know this.

You’ve undoubtedly heard the old expression that half a loaf is better than none. Lenders understand this very well. If you give them a choice of negotiating or bankruptcy, most will choose to negotiate – to get that half a loaf.

What to ask for

When it comes to negotiating with a lender, your initial offer should be low. Very low. Once you name a number you can’t go lower. You can only go up.

Let’s say you owe $6000 on a credit card. Your first offer might be $2000. Is the lender likely to accept that?

Probably not. In fact, you might get a flat turn down. But what’s more likely is that you’ll get a counter offer for, say, $5000. You could counter the counter at $3000, and the lender might agree to that. If so, you’ve just saved $3000.

Before you start jumping for joy

There’s the old saying that there’s no such thing as a free lunch. While you might be able to cut a debt in half through negotiation, it will come at a price.

For one thing, you’ll need to have that $3000 (or whatever) available to immediately send the lender. If you can’t promise this, you’ll be out of luck. Very few, if any, lenders will let you pay off a debt for less than you owe if you can’t promise to make that immediate payment.

Second, debt negotiation, or debt settlement, will have a negative effect on your credit score.

– this is simple. You did not repay your debt(s) in full as you had promised.

How much will this damage your credit score?

It could drop it by 80 or more points.

Debt settlement will also make it more difficult for you to get credit in the future. Lenders are not dummies. When they see you failed to repay your debts in full, they’ll either flat turn down your application or pump your interest rates way up — to offset the fact that you’re now a risky borrower.

Using a debt settlement company

Debt negotiation is essentially the only way to get unsecured debts paid off for less than their balances. Just think. If you owe $18,000, some tough negotiating could get that whittled down to $9000.

However, this assumes that you’ve had a true financial emergency, and that you have the cash available to pay for your settlements. These are two of the biggest reasons when most people choose to use a debt settlement company and not try DIY debt settlement.

Lastly, but certainly not leastly, hiring a debt settlement company means they’ll do the negotiating for you. And because the good ones have done this over and over, it’s just about certain they’ll negotiate better settlements than you could yourself.

We read an article recently suggesting that six-year olds should be taught personal finance. We’re not sure we agree with this but one thing is certain. The overwhelming majority of people that graduate from high school have never had a class in personal finance. In fact, a survey released recently by the nonprofit Council for Economic Education revealed that only 13 states require high school students to take classes in personal finance to graduate. This means that kids in 37 states will have graduated knowing about things like algebra, chemistry, physics, and French, but with no knowledge of personal finance.

Did you not graduate from high school in one of the states that required you to take a class in personal finance? Did your parents not teach you about it? Then, you might be making these mistakes about personal finance and debt negotiation.

Paying just the minimum every month on your credit cards

If you’re doing this, you’re making one of the worst possible mistakes in personal finance. And you might just as well go through life wearing a hat labeled “sucker.” This is called credit card rotation, and experts say it’s the most expensive form of interest known to formal finance. The interest rates on your credit cards could go as high as 36% a year, plus fees that can make it even more expensive. The best thing you can do if this is what you’re doing is … stop.

Not having a budget

Trying to manage your money without a budget is pretty much like setting out on a trip without a map. You might get to your chosen destination, but it will only because of luck. There’s just no way to pay off debts or save for retirement without a budget. If you think that creating a budget would take lots of time and effort, you’re wrong. Apps are now available that make creating and sticking to a budget Drop-dead simple. Three of our favorites are Mint, You Need A Budget (YNAB) and Mvelopes. Mint will track your spending, divide it into categories for you, and even send you an alert if you overspend in one of them.

Taking advice from the wrong people

Do you have friends or relatives that just love to give advice about everything thing from how to care for your lawn to where to invest your money? If, so your best bet is to ignore it, especially when it comes to investing. This is a case where you should definitely get a professional involved. Good financial advisors don’t work free, but the money you’ll pay one can return big dividends over and over. Just be sure to choose one that’s a Certified Financial Planner. They are required to meet certain examination, education, experience, and ethics requirements, so you should be able to trust her or his advice about investing, insurance, and even income tax planning.

Not having an emergency fund

Did you know that, according to the Huffington Post, nearly half of all Americans don’t have less than $500 saved? We hope you’re not one of them. If you are, you need to get to work and create an emergency fund the equivalent of at least three months of your net income. Then, when your car’s engine need serious help, you have to take an emergency trip to the hospital or you lose your job, you’ll have money to cover the cost. If you don’t, you’ll have only one option — the D word — putting It on a credit card and creating (more) debt.

Not understanding you can negotiate your debts

Well, okay, some debts just can’t be negotiated. To prime examples of this are your mortgage and auto loan. The reason they generally can’t be negotiated is because they’re secured loans. You provide an asset such as your house to get the loan. So, if you fail to make your payments, you could lose it.

The easiest debts to negotiate are usually credit card debts. They are unsecured debts. If you fail to make your payments, there’s nothing the credit card company could seize This makes them more amenable to debt negotiation.

Failing to understand the power of the word bankruptcy”

If you contact a lender, such as a credit card provider, who won’t negotiate use the word bankruptcy as in, “If you refuse to negotiate with me, I’ll have to file bankruptcy.” That generally does the trick. Some experts even believe you should lead with the word bankruptcy.

In summary

Personal finance is, without question, in area where what you don’t know can hurt you. The information you’ve read this article can help, but you really need to do some reading. Get a book like The Total Money Makeover by or Dave Ramsey, or Rich Dad, Poor Dad by Robert Kiyosaki. The few hours you’ll spend reading one of these books will pay off big time over the course of your lifetime and as they say, that’s a fact, Jack

You may know debt negotiation as debt settlement or debt arbitration. But regardless of what you call it, it boils down to the same thing – negotiating with your creditors to settle your debts and for less than their balances.

Again, regardless of what you call it, one thing holds true. You must be having a financial emergency before creditors will agree to negotiate. This could be that you just went through a divorce where you were stuck with most of the debt, you lost your job, or ran up a huge number of medical bills. The point is that creditors won’t agree to negotiate just because you ask. You need to have a reason. And you may be asked to provide documentation that proves your emergency.

Lump sum payments

A third reason creditors might be willing to negotiate is if you can promise to make an immediate lump sum payment in settlement. For example, suppose you owed $1800 on a credit card. You might be able to negotiate that down to $900, but only if you can promise to immediately send the $900 in the form of a cashier’s check, postal money order, or wire transfer.

Where extreme saving comes in

If you’re having a financial emergency already, you probably don’t have enough money on hand to settle any of your debts. This is where extreme saving comes in, which means you will need to act fast, and learn some new habits.

The first thing you’ll need to do is begin to treat saving money as if it was just another bill, and make it a line item on your budget. The easiest way to do this is to have a set amount automatically transferred into your savings account every pay period, and be sure it’s an account where there’s no debit card attached. This will help keep the money out of sight, and will prevent easy access so that you continue to accumulate it untouched. Plus, it’s money you never actually see, so you don’t miss it as much.

Embrace the concept of delayed gratification

It’s crucial to learn how to delay gratification. If you want to be a really extreme saver, you need to think of saving money as being far more important than wearing expensive clothes or driving a new car. You have to learn to not care what other people think of you. You just can’t care about material things. Believe it or not, there are people who have millions of dollars in savings but are driving a car with 200,000 miles on it. If you knew these people, you would guess they only earn about $30,000 a year.

Learn to fight lifestyle inflation

Lifestyle inflation is what happens when you get a raise and use the money to better your life. As an example of this, if you were to get a $5000 a year raise, you could be tempted to buy a better car, get a whole new wardrobe or update your kitchen appliances. If you want to be an extreme saver, you need to fight this kind of lifestyle creep. You need to learn the habit of saving every raise, every bonus, and every dollar you got from your aunt Emily’s estate. To really build your savings rapidly, means maintaining your current level of spending regardless of any new income.

Marry well

We don’t mean by this that you should marry only a man or woman with money, though that wouldn’t hurt. What we mean by this is that you should try to choose a mate that’s also careful about spending money. If you make the mistake of marrying someone who is carefree or reckless when it comes to money, this can make it much harder for you to save money.

Don’t start big

It’s better to start with the goal of saving a small amount out of every paycheck like maybe 3%. If you start off by trying to save 10% or 20% of your net income, you could fail the second or third month, and then just give up and quit. However, if you set a smaller savings goal, and you’re able to achieve it for maybe six months, you might then increase it to that 5% or even 10%.

Use this one simple rule

If you want to become an extreme saver, you need to follow one simple rule: If you can’t pay cash don’t buy it. Of course, you can continue to use a credit card but never charge more than you can pay off at the end of the month. Going into debt – especially credit card debt – as it just keeps you from saving money.

In summary

Extreme saving for debt negotiation (or debt settlement) is just not that difficult. Develop a budget then follow the tips you just read in this article, and you should find saving enough money to begin negotiating your first settlement both fast and easy.

You’ve probably seen ads beginning with, “How to lose 100 pounds of ugly fat.” While that might not be for you, you can lose thousands of dollars of ugly debt through debt negotiation.

Debt negotiation, or it’s usually called debt settlement, is simple in theory. It’s when you negotiate with a creditor to get it to accept less than you owe but then treat the debt as if it had been paid in full.

However, you can’t just contact a lender, offer to settle your debt for less than you owe, and expect the lender to readily agree. Lenders will never settle a debt if it thinks you could pay the full amount due. This works only if you’re several months behind on your bills, have skipped payments or possibly have debts that have gone to collection.

Only unsecured debts

If your big problem is your mortgage, automobile loans, or student loan debts, you’re out of luck. These are secured debts and cannot be negotiated. (Note: student loan debts are technically not secured debts,, but federal government rules prohibit them from being settled..)

Start low

When you contact a lender, your first settlement offer should be on the low side. For example, if you owe $1800 on a credit card, your first offer might be $300. Don’t expect the credit card issuer to accept that offer. What it will most likely do is give you a counter offer. You could then counter the counter, and so on, until the two of you agree to a figure.

Accumulate as much cash as you can

There may be exceptions to this rule, but generally speaking, you must be able to promise a lender that, if it settles with you, it will immediately get a lump sum payment to settle the debt – by cashier’s check, money order, or wire transfer. It’s necessary you be able to promise this because, if not, why would the lender settle with you? It’s already getting its money in the form of payments. So, why would it agree to let you pay for your settlement over the course of three or six months?

If a lender refuses to negotiate

There isn’t any law that says a lender must negotiate with you. You could contact a lender, offer to negotiate the debt, and be flat turned down. But don’t worry. You have a secret weapon. All you need to do is say something like, “Well, if you refuse to negotiate, I’ll have to file for bankruptcy.”

That should be enough to get the lender to sit down at the bargaining table. This is because you’re talking about an unsecured debt. If you file for bankruptcy, there’s nothing the lender could repossess. Most lenders – even the obstinate ones – will decide it’s better to settle than to get nothing, which is what they’d get if you were to file for bankruptcy.

You need to be strong

Negotiating with lenders is not for the faint of heart. You need to be tough and persistent as you’ll be negotiating with people whose goal in life is not to give their company’s money away. If you don’t feel you would be fast on your feet mentally or capable of negotiating like a gangster, your best bet might be to hire a debt settlement company like National Debt Relief to negotiate for you.

You also need to be persistent

The first several times you call a lender, you may not be able to reach someone with the authority to negotiate with you. You will need to be persisted an keep calling until you reach someone that does. Even after you reach that person, you will need to be persistent and keep negotiating until you get the settlement you want.

Ask for a big favor

When you settle a debt with a lender, you need to ask for a big favor, and that’s to have the debt reported as “paid in full.” Lenders will normally report debts that have been settled as “settlement,” “settled for less than full amount,” “settlement,” or similar wording. The reason you don’t want any debts you’re able to settle reported this way is because of the damage it will do to your credit score. While no one knows for certain how much debt settlements will affect your credit score, there are experts who believe it will reduce it by at least 80 points. In addition, when potential lenders see you did not completely pay off your debts, they will be less likely to loan money to you.

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.

You’re just sick and tired of trying to deal with your debts and would like to begin negotiations with your lenders to get them ultimately paid off. But you’re having a hard time deciding where to start. It would probably be easy to determine which one to negotiate first if you have just a couple of debts. But if you have multiple debts it can be tough trying to figure out which ones to negotiate first.

Categorize them

The first important step in deciding which one to negotiate is to categorize your debts. There are really only two types — secured and unsecured. Secured debts are where you were required to provide some asset as collateral. For example, mortgages are secured debts. In comparison, unsecured debts are those where you didn’t have to provide any collateral such as credit card debts, medical debts, personal loans and personal lines of credit.

You can cross of your list any auto loans because they cannot be negotiated.

Mortgages cannot be negotiated but it’s possible to refinance to get a better interest rate or a lower monthly payment.

Student loan debts are unsecured debts but also can’t be negotiated. However, there are a number of different payment plans and you could probably move to a better one.

Rank them by their interest rates

Your next step should be to rank your debts in terms of their interest rates with the debt that has the highest interest rate at the top down to the one with the lowest. Here’s where a spreadsheet program can be helpful because you could use it to list the name of each of your lenders, the interest rate, balance, payment due date and the minimum payment required.

The first debt you will probably want to negotiate is the one at the top of your list as it’s costing you the most money. However, you could decide to first negotiate the one with the lowest balance as it would be the easiest to pay off. Negotiating the debt with the highest interest rate first is called the Avalanche method while first negotiating the one with the lowest balance is called the Snowball method.

Determine what you want to negotiate

Before contacting any lender, you must decide what it is you want to negotiate. The options are to negotiate for a better interest rate, to have your payments waived for several months or to settle the debt. You need to think this through carefully because you may want to negotiate different things with different lenders. For example, if you have a credit card at 19% you might want to try to negotiate that down to, say, 12%, which would translate into a much lower monthly payment.

If you decide to negotiate settlements

You may decide in some cases that your best option is debt settlement. This is where you offer your lender a lump sum payment for less than your balance to settle the debt. There are two important questions here. First, do you have the cash on hand to pay for any settlements you’re able to negotiate. Second, are you experiencing a financial emergency such as a huge medical bill, lost your job or had a divorce that left you cash strapped? If you can answer yes to both these questions and are a reasonably good negotiator you might be able to get your debts settled for 40% or 50% of your balances.

When you’re cash strapped

If you don’t have the cash necessary to pay for any settlements, there is a good option. It’s to hire a professional debt settlement company such as National Debt Relief. This would eliminate the need to have cash available to pay for your settlements because instead of this, you would transfer a set amount each month to an escrow account where the money would ultimately be used to cover the settlements that the settlement company negotiates on your behalf.

What professional settlement firms charge

Reputable settlement firms charge a flat fee based on the amount of debt being settled. Their fee typically ranges from 15% to 25%. This translates into a dollar cost of $1800 to $2500. And while this may seem on the high side, good debt settlement companies are still able to save their customers an average of anywhere from 30% to 37% – after their fees. In addition, the settlement company will be handling all of your lenders and debt collectors so that you’ll be totally free from the stress involved in dealing with them. And can you just imagine how good that would feel?