Writing a debt negotiation letter is the first step in attempting to pay down your debt in a way that meets your current budget constraints.Negotiating debt is helpful if you want to save your credit score, but can't afford to pay everything.The following steps can be taken to get the attention of your creditor.
Step 1: You must confirm your debt obligation.
Late fees, taxes, interest rates, and any other fees that have been added since the original bill are included.In the event of default, it should include the terms of repayment and procedures.You should contact the creditor before writing the letter.
Step 2: Determine your financial situation.
You can create a budget based on income and expenses.If you know how much you can afford to pay in settlement payments to your creditor, you'll be able to prove that your settlement is all you have left.If the creditor wants to know your financial details, make sure to collect documentation.20 percent is a good percentage of net monthly income.You can save 10 percent and put the remaining 70 percent towards living expenses.All debt payments should be made using this 20 percent.If you have other debts in addition to the one you are negotiating, you will have to factor in that monthly cost before determining how much you can pay on the negotiated debt each month.If you make $3,000 a month, you can put 20 percent of that towards debt repayment each month.If you only have a car payment of $200 per month, this leaves you $400 to pay off your debt each month.
Step 3: Decide what kind of settlement you want.
If your settlement offer is accepted, you will be able to modify your payment terms.This can be accomplished in many ways.Ask for a solution that works for you.You can ask for a balance reduction, a lower monthly payment, or temporary relief from payments.You should be able to afford the settlement you ask for.If you've lost your job but are still looking for a new one, a respite from payments may be useful.When your income returns, you can continue to repay your loan.Someone with more serious long term income reduction or high ongoing expenses may be forced to ask for a balance reduction.You can reduce your payments to a manageable level.
Step 4: Debt negotiations should be prioritized.
If you are considering your finances, focus on your most important debts first.This depends on whether or not your debts are secured.You want to focus on the debts that are most painful, such as losing a home or an automobile.It would be more difficult for you to let payments lapse on these debts than on your credit card debt.
Step 5: Determine how much to give.
If you can give your income and expenses, you should offer to pay more.If you can't afford it, your creditor will expect you to repay between 40 and 60 percent of your debt.Your creditor may reject your settlement offer if you start at the lower bound.Depending on the type of debt settlement you are asking for.If you are asking for a balance reduction due to medical difficulties or another long-term reduction in your ability to pay, your lender may realize that they will have to accept what you offer or risk getting nothingIf you ask for a payment break due to a temporary reduction in income, you may be required to make higher payments once you regain your income.The missed payments would be made up by these payments.If you want to repay the majority of your debt while paying a lower monthly payment, you can ask for an increase in repayment duration.It is possible to negotiate a lower interest rate.Without changing your principal, this would reduce the amount paid.
Step 6: The collections agencies should be handled differently.
Debt that has been sold to a collections agency should be treated differently than debt still owned by original lenders.The debt has been sold for a small amount and the collections agency hopes to get more than they paid.They can get a small settlement as a percentage of the original debt amount.For old debts, a collections agency might accept less than 10 percent of the original value.Know your rights.To limit communications to letters, notify the creditor.You don't need to be harassed during this time.Under your state's statute of limitations, make sure the debt is still collectible.If you don't have a legal requirement to pay, a collector may seek repayment.Check the statute of limitations for your state and type of debt by visiting http://www.bankrate.com/finance/credit-cards/state-statute-of-limitations-for-old-debts-1.aspx and locating the relevant number of years in the chartYou should consider working with an attorney.An attorney is evidence that you are knowledgeable of your rights, prepared to make collection difficult, and capable of filing bankruptcy as a last resort.
Step 7: The letter should be opened appropriately.
Send the letter to Sir or Madam.If you know the person's name you can use it.On the left side of your letter, put the name of the lender, their address, and "RE:" followed by your account number.
Step 8: You should include your account information.
In your first sentence, state your account number and name.You should state the amount of the debt and the monthly payment that the creditor wants you to make.
Step 9: Tell me why you can't make the payments.
Give a brief description of the situation that is preventing you from making your payments.Many borrowers have unexpected health-related expenses and experience job loss so they are used to hearing these reasons.Don't write a sob story to get your creditor to feel bad for you.It's better to explain the situation in objective terms.Use actual numbers, like your monthly income, living expenses, and debt payments, to describe your financial situation.Make it clear that your only other option is to file for bankruptcy.Proof of your situation can be attached to the letter.Proof of unemployment or a doctor's note could be included.
Step 10: Tell us about your proposal.
The reason for writing the letter is that you owe money and need a compromise.You should be clear about what you're asking for.Do you want a reduction in the amount of the loan, a longer repayment period, or a reduced interest rate?Make your offer terms clear.Make your monthly repayment amount as much as you can afford by taking into account your income and expenses.If you make an offer of payment to the creditor, be sure it's realistic.Defaulting on an agreed upon repayment plan can limit future opportunities.
Step 11: Ask the creditor to protect your credit.
Request that the amount you propose be considered payment in full so that your credit report is not damaged when you negotiate your debt.If you ask the credit reporting agencies to not report your debt as paid or settled, it may work out.You should make it clear that you want the debt removed from your credit report.Your credit score will be protected by this.
Step 12: Money order or cashier's check are some of the forms of payment that you can specify.
If there is a date when the payment will be received by the creditor, the contract will remain valid.It is likely that your creditor will accept your settlement if you have cash on hand.
Step 13: The letter should be written using a professional tone.
Don't give too much information about your life to the creditor.Under a page, keep your letter to the point and short.Don't lie, plead, or beg with your creditor.They will only respond to your offer of repayment.
Step 14: You should end your letter correctly.
If you want to close the letter out, put your name under it.Put your phone number and address under your name.
Step 15: You should check over your letter before you send it.
The debt negotiation letter should be inspected by a lawyer or credit counselor to make sure the point is clear.The letter is considered a legal document, so make sure you don't make any statements that can be used against your interests in court.)
Step 16: Wait for a response and send the letter.
Attach a record of your creditor's receipt of the letter to your certified mail.Copies of your letter, any future letters, and any responses you receive should be kept in your records.If you end up in court with your creditor, they will be useful.
Step 17: Talk to the lender.
If the creditor does not agree to the sum proposed in your debt negotiation letter, increase the offer.Accepting a payment is in their best interest if you can't afford anything else.They know that if you file for bankruptcy, you won't be repaid, so getting something from you is better.If you file for bankruptcy, you may lose pledged assets if the loan is secured.There is a chance that co-signers will be called for payment.Write down everything that is said when you're on the phone.Write down settlement amounts, repayment details, and who you talked to.Before revising an offer, always get a counteroffer.Get a recording device for collection calls and let callers know you are recording.It's useful when dealing with collection agencies.
Step 18: A written agreement is needed.
You need a written agreement from your lender to make the agreement legally binding.The agreement should clearly state that the settlement will result in the forgiveness of the original amount and that it must be paid in full.Make sure that your lender creates and signs this document, instead of just signing a copy of your letter and sending it back.
Step 19: Comply with the terms.
Obey your part of the contract by paying the amount that was agreed upon by the specified date.Once you have paid, you should request a receipt from the creditor.If another creditor appears with the same debt, the settlement agreement should be kept for seven years.
Step 20: You should check your credit report about 3 months after you negotiate your debt.
It should be referred to as paid in full on your report so that it doesn't affect your credit score.Send a request to the credit bureaus to correct the report if it doesn't show up as being paid, and include a copy of your debt negotiation letter and receipt.