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August 20, 2019
How to Negotiate a Settlement with a Debt Collector

How to Negotiate a Settlement with a Debt Collector

Negotiations can be delicate in general, but when it comes to your own finances you want to make sure you know what you’re doing so you don’t end up paying more than you need to. There are companies out there such as DebtQuest that can negotiate debt settlements on your behalf, but if you feel like becoming a pro instead of consulting them there are a few important things to know before you begin.

First, no one is going to negotiate with you unless they can actively see financial hardship. One of the only ways to show this in the finance world is by not making payments. So if you were paying the minimum amount on each of your credit cards every month, stop. It sounds counterintuitive but basically creditors will say, hey, they are making the minimum payment, no signs of struggle here.

They want your money, bottom line. They don’t really care about your credit or care about how they get it; at the end of the day, their job is to get your money. So in order for them to feel a little nervous about whether or not they will get some or any money from you, they need to see that you don’t have it. The most basic thing to remember when negotiating with creditors is that they want what you have and if they think there is a possibility that they won’t get anything, they are going to work with you. Never show your hand or they will call your bluff.

What You Want To Pay

The next thing to consider is what you want to pay. Obviously you don’t want to pay anything, but that’s not going to happen, so what is a reasonable amount that you could work with? Most debt settlement companies can negotiate anywhere from 20-50% off your debt owed, but keep in mind these are companies that have established relationships with the creditors as well as inside knowledge as to how far they can push the negotiations. It’s always good to aim high and then negotiate down, this way you end up paying what you decided was affordable before the negotiations began.

Two Ways To Approach Debt Consolidation

It’s important to understand that there are two different ways to approach debt consolidation, through secured and unsecured loans. A secured loan is basically where you pledge certain items as collateral in order to secure the repayment of the loan.

For example, if you wanted to consolidate all of your debt into one payment and you decided to obtain a secured loan through refinancing your house or taking out a second mortgage, you can definitely do that. Secured loans will provide you with even lower interest rates and lower monthly payments because the bank has a lower risk of you not paying; otherwise you lose your house or your car or your life insurance policy, depending on what you decide to place as assurance. So lower risk for the bank, but higher risk for you if down the road you can’t make payments.

Be direct and stay firm

Once you begin the negotiation process with a debt collector, don’t forget the simplicity of it; they are trying to get the most money out of you and you are trying to pay the least amount possible. A failure to them would be getting no money from you at all and they definitely don’t want that to happen. You’ve got nothing to lose. Even if you do and you are seriously concerned about your credit score if you don’t settle, try to keep the “I’ve got nothing to lose” mentality during the negotiations, it’s going to get you a lower settlement.

Then if things do go poorly, don’t forget you have plenty of options as far as assistance goes. DebtQuest is a reliable company to turn to for counseling and/or settlements. Let them know right off the bat you are willing to negotiate, but ensure they understand that the money just isn’t there so if they don’t work with you on a proper settlement amount, they aren’t going to get any money from you and you will use that money for other settlements with your other debts. Even if you know this isn’t the case, act like it is.

How to Negotiate a Settlement with a Debt Collector

Time For Payment

Once you reach a reasonable amount, now comes the time for payment. They will usually negotiate a payment plan, but what will give you more negotiating power is if you can pay a large portion of that settlement upfront. Because here’s the thing, they don’t have your money yet and there’s no assurance that you will pay. They negotiated with you, but you could still walk away, which wouldn’t be beneficial for either party.

If you owe $1,600 on a card and you settled on paying the collector $900, you could squeeze in just a bit more negotiating. You could try to ask if they can reduce it by even $50 more, and then you would be able to pay $450 today and $100 each week until the negotiated balance is fully paid off. This gives them the assurance that even if you didn’t pay the $100 each week after that, they at least have $450 from you.

They will hound you if you don’t stick to the plan they set up with you. They could even increase the negotiated amount. There are no guarantees from either side so if you decide on a plan with them, it’s important to stick to it.

Dealing with debt is never fun; dealing with debt collectors is even less fun. Trying to negotiate a settlement when you don’t know what you’re doing is a recipe for disaster. Hopefully this article gave you enough tips to send you down the pro route. But remember, if you aren’t confident in your negotiating skills, you can always contact DebtQuest to assist with debt settlement.

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