How to Negotiate Debt Settlement on Your Own

Are you caught in a debt trap? Maybe your payments barely touch the principal. Most of your money goes to interest instead.

You might struggle to make regular payments. Your disposable income disappears. Savings and retirement take a back seat.

Debt settlement can break this cycle. You pay a lump sum for less than you owe. Your creditor wipes your slate clean. Collection activities stop.

Many agencies handle debt settlement for you. But they charge steep fees. You could pay 25% of your total debt just for their services.

You hand over control to others. You also spend more money than necessary.

Why not negotiate with creditors yourself? The process takes time and effort. But you’ll save money and escape debt faster.

How To Negotiate Credit Card Debt Settlement Yourself

You don’t need an attorney to settle debt. We asked a debt lawyer for tips on negotiating with creditors and collectors.

Here’s what works:

• Never threaten bankruptcy unless you mean it. Empty threats fall flat.
• Paint a clear picture of your financial hardship.
• Show proof of limited ability to pay. Social Security income, multiple debts, or wage garnishments help your case.
• Make realistic offers. Expect a counteroffer in return.
• Junk debt buyers typically settle for 10-35% of total debt. Original creditors may accept 50-75%.
• Keep payment plans realistic for your budget.
• Stay truthful about your finances. Creditors already have detailed information about you.

How Does the Debt Settlement Process Work?

Start by listing debts you want to settle. Write down current balances for each one.

Most agencies advise stopping all payments to creditors. You’ll save that money in a separate account instead.

You can stop all payments at once. Or start with just a few creditors. Stopping a few keeps you in good standing with other lenders. You avoid potential lawsuits from creditors you still pay.

But stopping only a few payments slows your savings. Find ways to increase savings. Divert extra money or earn more income.

Save at least 75% of your target account’s total value. Then you’re ready to negotiate.

Start Negotiating a Debt Settlement With Your Creditors

Once you have 75% of the debt value, send a settlement offer. You can use this template:

“I am offering you a lump-sum payment of $[amount] to settle my obligation with account number XXX. You can accept or counteroffer. If you accept, respond to this message with only ‘Accept.’ If you want to counteroffer, respond to this message with only ‘Counteroffer: [$amount].’

Please do not contact me in any other way than by responding to this message. The offer expires in 6 days on MM/DD/YY. I will pay the agreed amount within 90 days of the settlement date.”

Offer at least 60% of the total debt value. For a $2,000 debt, you might offer $1,200 to settle.

Expect several rounds of negotiation with the creditor. Having 75% available gives you negotiating room.

Once you reach an agreement, get everything in writing. Pay the money on or before the due date. Never miss this deadline.

Our partner Solo can help you navigate the settlement negotiation process with creditors and collectors.

What Should You Do After Settling Your First Debt?

Follow the same process for each remaining debt. Save money as fast as possible. You’ll break free from debt more quickly.

Treat debt settlement like ripping off a bandaid. Most programs last two to five years. But you can finish earlier without paying 25% to an agency.

Review your household spending honestly. Find areas to cut expenses. Skip dining out for a while. Trade your new car for a used one.

Can’t save more from current income? Consider a part-time job. A second job seems exhausting. But the effort eliminates your debt faster.

Debt Settlement Will Affect Your Credit Score

Debt settlement can hurt your credit score. The impact hits hardest if debts are in collections. You’ll need to rebuild credit after finishing the settlement process.

Keep one or two credit cards open if possible. Repay them as usual. Don’t let them go into collections. You may not save money. But proper management maintains a solid credit history. Your score will increase over time.

Debt settlement beats bankruptcy hands down. Bankruptcy stays on your credit report for up to ten years. Getting new loans or purchasing a home becomes extremely challenging.

Late payments and collections remain on your report for seven years. But their importance declines as months pass after settlement. Your score rebounds sooner than with bankruptcy.

Manage your finances carefully going forward. Avoid another debt trap. Minimize your use of debt. Build up your savings instead. Rely on savings for unexpected expenses.

Our partner Solo makes debt settlement simpler by handling negotiations for you through an easy online process.

What Is Solo?

Solo makes resolving debt with collectors easy. You can respond to debt lawsuits. Send letters to collectors. Even settle debt directly.

The Answer service guides you through completing your response. An attorney reviews your document. They file it for you.

The settlement tool helps you contact debt collectors or creditors. Negotiate the debt to settle for less. Everything happens online. The process simplifies and streamlines settling your debt.

No matter where you are in the debt collection process, Solo helps you resolve your debt.