When you begin to realize your debts are mounting and you are about to lose control of your finances, it is in your best interest to begin the process of debt settlement on your own right away. Debt settlement sounds like a complicated process average consumers cannot handle on their own. Actually, it is this myth that often perpetuates the vicious cycle of debt.
There are many reasons why your financial status will fall into disrepair. Job loss, expensive medical treatments, investments gone wrong, overspending, and even fraud can throw your financial affairs into a spin, leaving you with creditor calls demanding money and dwindling funds in your savings accounts. Making a move as soon as you realize where your financial affairs are headed will serve you well.
How to Start the DIY Settlement Process
Settling debts on your own may sound ominous and overwhelming but that is simply not the case. All consumers have the power to settle their debts but many fear the process.
To start out you should make a list of your financial outlook. Use your existing budget or create one if you haven’t used a budget before. (Incidentally, not having a budget is the trigger that leads many into the downfall of debt.) Find out exactly how much you owe to each creditor and then figure out how much of your income or savings goes out to monthly financial obligations. Money left over should be noted.
Next, make a list of your creditors and their contact information. Decide who the priority is in the debt settlement process. Perhaps you need to contact your highest-interest credit card provider before you contact your medical provider’s office. There is no definitive answer as to who should come first so you’ll have to figure out which debts need settlement first.
The Negotiations
Once you have established your creditor list, contact the highest priority creditor. It may be wise to ask for a manager as soon as the phone is answered to ensure you are speaking with someone who has the authority to give you the answers you need. Be upfront with the company representative and briefly relate your current or impending financial hardship.
For instance, if you have just been laid off from work, let the company know the situation and how long you expect the hardship to last. Ask if there is an acceptable amount of money less than the balance you owe that you could pay to settle the debt in full since you anticipate being unable to fulfill your monthly obligation for long. If the manager can not accept a one-time payment, they may be able to suggest alternatives such as lowered monthly payments for a period of time. If you do not have the amount of cash necessary to settle the debt, ask if they will rework your payment obligations on a monthly basis.
Whatever arrangements can be made with your first creditor, be sure to request the details in writing from the company. In some cases, consumers have neglected to get a copy of the arrangements in writing and therefore were later unable to prove their deal, making them responsible once again for the total balance due regardless of previous payments being made on the account. Most creditors will not go back on their word but the written confirmation is the only proof you have on your side as a consumer.
Once you have settled the debt with the first creditor, you’ll need to re-evaluate your finances to see what debt to tackle next. In the situation where one creditor refuses to settle your debt for a lesser amount, move on to the next and do your best to keep your monthly payments going, even if you are only paying the minimum due.
Why Waiting Is Devastating
If you wait too long to contact your creditors to keep an open line of communication, your debt problems will only grow and compound financially. The added fees, penalties, and interest charges only mean you’ll have a bigger balance to fork over. As soon as you know that times will be tough for you financially, reach out to your creditors for help.
Realize you are not the only debtor with financial hardships. In most cases, creditors will be open-minded and flexible if you give them the opportunity. They are not blind to the state of the current economy and may have resources and options you do not even realize that can significantly help you pay off owed balances. Until you open up and admit where you are heading, you will get nowhere in your pursuit of your debt relief goals.
Don’t wait for collection calls to start or for someone else to step in. You are responsible for your debts and the earlier you are able to reach your debt elimination goals, the faster you can get back on the right financial track.
