The next best thing to firsthand experience is often knowledgeable advice. Someone thinking about running their first marathon might ask a more seasoned runner if they have any tips for training or handling the race. A new hire at a company might ask a manager or colleague what they wish they’d known during their early days with the organization. Soon-to-be-parents might ask their friends and family members for their best childrearing suggestions ahead of the due date.
So, it makes perfect sense Americans looking to eliminate their debts would want to know the scoop on debt relief options before taking the leap. Debt settlement is one strategy that has helped many borrowers pay off debts they would have been otherwise unable to fulfill.
We’ve rounded up some smart debt settlement advice to keep in mind as you navigate the process.
Know the Ins and Outs of Negotiating with Creditors
The outcome of debt settlement mostly depends on being able to successfully negotiate with your creditors. Some consumers decide to tackle negotiations on their own, while others decide to work through a debt settlement program — meaning a negotiations team handles the actual back-and-forth.
Either way you go about it, knowing how to maximize your chances of success during negotiations is key.
Some of the staples of negotiating include:
- Be prepared to explain to creditors what hardships are making it difficult or impossible to keep up with your monthly payments.
- Try to settle your debt for 50 percent or less of your current balance amount. Start negotiations low and work your way up slowly as needed.
- Have the funds you will need to hold up your end of the bargain ready to go — this often requires months or years of saving up.
Explore All Your Debt Relief Options
The journey toward becoming debt-free can look different for everyone depending on the amount of debt to be eliminated, income, credit score and many other factors. This is why it’s important to explore all the debt relief options available to you before deciding upon settlement — and then, beyond that, exploring all the potential ways to settle before committing.
It may be helpful to think of debt settlement as a more specific branch of the broader category of “debt consolidation.” Reducing the principal balances you owe by negotiating with creditors is one way to streamline and get out of debt, but it’s not the only way. Here are a handful of debt consolidation options worth exploring, according to Brad Stroh of Freedom Financial Network:
- Use a balance transfer credit card to get zero-percent APR
- Take on a debt consolidation loan to pay off other debts with higher interest
- Borrow against the equity in your home for low interest rates
- Enroll in a debt management plan at a credit counseling agency
- Follow a debt settlement program if you’re unable to keep up with payments due to hardship
When you know your options, you can compare your needs against what each strategy offers, increasing the chances you’ll be able to meet your debt goals.
Learn How to Prevent Getting Scammed
Unfortunately, many Americans have inadvertently trusted deceptive companies that promised to help them with their debts. The Federal Trade Commission advises consumers to steer clear of companies that engage in any of the following practices:
- Charges fees up front before delivering any services — this is illegal.
- Makes bold promises about how much it can reduce your debts.
- Glosses over the risks of debt settlement.
- Vows to stop collections calls and lawsuits.
The internet is full of smart debt settlement advice from reputable organizations and individuals. You may not have experience with debt relief firsthand, but you can learn from experts and use this advice to guide you through the process.