How to Settle Debts On Your Own.
Posted: February 25th, 2011 | Author: Joe | Filed under: Debt, Tips | Tags: Credit Cards, Debt, debt settlement, Guest Post | No Comments »If you want to settle your debts, but you don’t want to hire a debt settlement company, you have an alternative – you can settle debts on your own. Debt settlement companies don’t have special privileges that make them the only people who can settle debts. You also have the right to make this negotiation on your own.
Take Inventory of Your Debts
Settling your own debts means you’ll be responsible for saving up the settlement funds and negotiating with the creditors and debt collectors who handle your account. To get started, you should make a list of all your debts, the amount you owe, and how past due the account is. All your accounts may be current. Or, you may have some that are 30, 60, or 90 days past due. Other accounts may be in collection. It’s important to know where the accounts are in the collection process. Update the past due status of each account as it progresses.
Saving Up for Settlement
When you negotiate a settlement, you generally have to be able to pay the settlement in full within a few days. So, you need to have your settlement funds ready to access when you start making negotiations. For most people, this means setting aside several hundred dollars each month until enough money has accumulated to settle an account. The amount you save up each month really depends on what you can afford. The more you can save up, the faster you can settle your accounts.
Downside of Settlement
The downside of debt settlement is that you have to stop paying your accounts to make a settlement. That’s because creditors don’t have a reason to settle an account that’s current on all the payments. When you stop paying your account, you’ll begin getting phone calls and letters from your creditors demanding payment. This is a normal part of the process.
Making a Settlement Offer
When your accounts get 90 days past due, you can mention settlement to your creditor to see if they’re willing to negotiate. Some creditors automatically send out settlement offers once the accounts reach a certain past due status. The good part about these automatic settlement letters is that you won’t have to convince the creditor to settle, you’ll just have to negotiate the amount.
Accounts that are already charged-off or have already been sent to a collection agency can typically be settled right away. You don’t have to wait for these accounts to get any older. But, if you have the chance to settle a past due account that hasn’t been charged-off, settle that account before you settle an account that’s already a charge-off. That way, you avoid having an additional charge-off on your credit report.
Get your settlement offer in writing on company letterhead before you pay the settlement. This helps ensure that you’re making a settlement agreement with someone in the company who’s authorized to take a settlement from you. Then, once you have the settlement agreement in hand with the settlement amount, date of the settlement, and a note saying payment will satisfy the account in full, then you can make payment.
What Happens After Settlement
When your account is settled, your credit report will be updated to show the settled status. Check your credit reports by visiting AnnualCreditReport.com to confirm that the settlement status has been updated. Once you’ve settled all your accounts, you can work on improving your credit score.
Settled accounts will stay on your credit report for seven years from the date you went delinquent. Adding new accounts and positive payment history will increase your credit score over time. If your negative credit history keeps you from being approved for a credit card, try a secured credit card that requires you to make a security deposit against the credit limit.
