The Six Deadly Deal Breakers of Debt Negotiation

Debt negotiation, which is often called debt settlement, can be a very effective way to get your debts paid off. In fact, thousands of Americans have used debt negotiation to get their debts cut by 40% or even 50%.

If you’re not familiar with debt settlement, it’s where you call each of your lenders and offer to make a lump sum payment to settle the debt. If a lender agrees to your offer it will then treat your debt as if it had been paid in full at least so far as you’re concerned. Unfortunately, any debt that’s been settled won’t be reported to the credit bureaus as paid in full and will have a negative effect on your credit score.

Assuming that you would like to try debt negotiation, here are six deadly deal breakers you need to know.

1.You don’t know what you want

Before you contact a lender you need to have an objective in mind. It might be to get your interest rates reduced, to have your payments waived for several months or to settle the debt for some percentage of its balance. Naturally, you’ll want to tailor your objective to each individual lender. For example, you might want to request an interest rate reduction with one lender but want to settle with another. The important thing is to sit down and think things through before you pick up the phone so that you will have an objective in mind.

2. You don’t have a story

If your goal is to settle a debt, it’s important to understand that no lender will agree to settle with you because you ask nicely. You need to have a reason or a “story” as to why you need to settle your debt for less than its balance. This could be because you’ve just gone through a terrible divorce, lost your job or were hit by a big medical bill. It’s best if you write down your “story” on a piece of paper before you pick up the phone. And it should be short and to the point.

No lender wants to hear your entire tale of woe. If your problem is that you lost your job, you might write down something as simple as, “I lost my job four months ago and I’ve been doing my best to find a new one but I haven’t been successful. I’ve tried to keep up with my bills but without any income I just keep falling further and further behind. I really need your help”.

3. You can’t prove your story

Many lenders won’t just accept your word that you’re having a financial emergency. They will ask you to prove it. Did you lose your job? Then there should be a letter of termination you could send a lender. Were you required to take a huge cut in pay? You should have pay stubs to prove it. And, of course, if you had a big medical emergency you’ll have the bills to send any lender that asks to see them. And never send originals. Make copies of your documents and send them. Keep the originals in your file.

4. You don’t have the money to pay for a settlement

The biggest reason why a lender will agree to settle your debt for less than its balance is if you can promise to send the money immediately via wire transfer or cashier’s check. The lender has no reason to settle with you If you can’t promise this. For example, if you owed $5000 on a credit card and your goal was to settle the debt for $2500 you’d need to have the $2500 available in cash. If not, don’t even bother to call the lender.

5. You’re not a very good negotiator

If you don’t feel you’re a very good negotiator you’re in good company. Most people just don’t think of themselves as good negotiators. However, the people you will be negotiating with are experienced and seasoned professionals. Their job in life is not to give their employers’ money away. They will do their best to keep you from getting whatever it is you want.

6. You make promises and then break them

Never make a promise to a lender that you can’t keep. If you’re settling a debt and promise to send the lender the money the following day, you need to send the money the following day. Fail to do this and you’ll lose all chances of ever settling that debt. If you ask to have your payments waived for three months so that you can catch up, you better be ready to start making your payments again on month four. And if you were able to get your interest rates reduced you better be prepared to start making your payments on time every time.