Most people have found themselves with debt that has gotten out of control at some point in their lives. Before enlisting the services of agencies that specialize in helping consumers get their finances in order, you should attempt a few self debt reduction techniques to see if you can first improve your situation on your own.
Avoid Having Your Accounts Turned Over to Debt Collection Agencies
Credit cards and loans and other debts will be turned over to “debt collection agencies” if you don’t make your payments. This is extremely harmful to your credit score, and having a low credit score makes obtaining financing in the future difficult- if not impossible. With a low credit score, if you are able to get loans or credit cards, you’ll be paying much higher interest so your debt will actually take longer to pay off and cost you more over the long term.
You’ll want to do everything possible to avoid letting your creditors turn your accounts over to debt collection agencies. Often, as long as you are sending money each month, the creditor will not turn your account to a collection agency- even if you aren’t sending the full amount due each month. If you know you need to send less than the total amount due for a while, start by making arrangements with your creditors.
Negotiating with Creditors
When people sign up for various credit counseling services and debt consolidation programs, the agencies actually contact each of your creditors on your behalf to try and negotiate better payment plans and lower interest rates. There is no reason why you can’t attempt to do this yourself.
First, make a list of each of your creditors. Include their names, phone numbers, the balance you currently owe, current minimum payments and the interest rates. Determine how much money you feel you can comfortably send to each creditor on a monthly basis and then make phone calls to each of the creditors.
Explain your situation- that you’ve come into a financially difficult time and you want to hold up your end of the bargain by making monthly payments. Most creditors, particularly credit card companies, will work out a payment arrangement with you. They might lower your interest rate or your monthly payment or a combination of the two in order to make your payments more affordable. Don’t be afraid to tell them the number of creditors you currently have, and how much money you’d like to send them each month- they just may be able to accommodate your desired payment schedule, at least for a specific period of time.
An alternative negotiation you may be able to arrange is for a payoff figure that is a few hundred dollars less than what your current balance is. Typically the requirements for such a negotiation is that you have the money to send immediately to pay off the account.
Don’t Take Their Word For It
When negotiating payment arrangements with creditors, make sure you always get a letter that describes the agreement terms, and what the consequences are if you don’t make the agreed upon payments. If you don’t have anything in writing documenting the outcome of your negotiations, you could find yourself paying late fees or higher interest rates when you send less than the minimum amount due on the accounts- you never know if the person you’re talking to will follow through and correctly update your account to reflect the agreed upon payment schedule. A written document from the company will give you leverage if necessary, and you’ll be able to remove late payments or lower an increased interest rate if problems arise.