At certain times, some people cannot afford to pay their creditors the full amount owed, for many reasons, but they do sincerely want to pay as much as they can. Continuing to make payments is the best way to keep a credit score from plummeting. A debt negotiation letter is the best way to get the attention of creditors and propose a compromise for making lower payments.
A debt negotiation letter needs to be clear and to the point. It may be considered a legal document if either party wants to go to court because the other party broke any agreement made. The letter must also be persuasive and convince the creditor that it is in his or her best interest to negotiate the debt.
The consumer needs to first collect all the information connected with the debt. This may include late fees, interest rates, taxes and other fees. If the borrower doesn’t know these details, he or she can call the creditor and ask. Most creditors, who are willing to negotiate debt, will not go below 50 percent of the debt.
In some cases, the creditor agrees for the consumer to pay half the debt in one lump sum. If this is the case, the letter should clearly state that the consumer is trying to maintain a high credit score, and request that the lender remove the debt from the credit report.
The consumer should always be professional and polite. It is not useful to use threats to make the creditor help, and it may cause them to do the opposite. The consumer should not say that if the creditor doesn’t help, the consumer may have to declare bankruptcy, and the creditor will then get nothing.
Even if the creditor responds by phone, the consumer should ask for any agreement to be sent in writing. All correspondence with the creditor should be in writing. If the issue needs to go to court, the consumer should have proof of any previous agreement. About three months after a debt negotiation is agreed, the consumer should check his or her credit report to make sure the debt that was negotiated is removed or not shown in arrears. If the credit report is not changed, the consumer should send the credit bureau a copy of their debt negotiation agreement and request that they change the report.
By Andre Bradley