Confirm Debt and Negotiate a Payment Plan
- Confirm whether you owe the debt.
- When negotiating, calculate a realistic payment plan.
- Make a proposal to the debt collector.
Pros and Cons of Debt Settlement
- Pros: Your debt may be reduced by half, providing relief and allowing you to move past the debt.
- Cons: Debt settlement stays on your credit report for seven years, potentially lowering your credit score.
Dealing with Debt Collectors and Settlements
Debt collectors should only contact you for reasonable purposes. It is illegal for them to harass you. Consult a nonprofit to fully understand all your debt settlement options.
Negotiating Settlement and Paying in Full
When negotiating, offer consistent settlement amounts to each creditor. Stop collection calls and letters by settling, which can also improve your credit history. Paying in full is generally better than settling, signaling to lenders that you can fulfill your obligations.
Settlement Percentage with Collection Agencies
Typically, a creditor will agree to accept 40% to 50% of the debt you owe. Start with an offer well below this range, around 30% of your outstanding balance. Always ensure you are speaking with someone who can accept a settlement offer when negotiating with the creditor.
Importance of Addressing Debt and Negotiation
Taking care of accounts is crucial for your credit score. It’s always better to pay off debt fully if possible, as settling still carries a negative impact. Before entering negotiations, know your rights and detail reasons for being unable to make full payment.