Five Secrets to Negotiating Lower Payments with Creditors

Debt can pile up quickly and soon get overwhelming to keep up with. If you get buried in debt and can't pay your bills, an option may be to negotiate lower payments with your creditors. That won't always be easy, and you will have to convince those creditors that taking what you can offer is the best deal they will get. However, there are a few ways you can make this process less stressful and more effective. Here are some ideas to get you started on lowering your debt:

Put bankruptcy on the table

Car and home loans are secured by property, and if you can't pay your bills, those lenders will simply seize your collateral. The creditors you will be negotiating with are likely to be unsecured creditors such as credit card companies. Those companies could be left with nothing in a bankruptcy and may be more willing to negotiate to get something rather than nothing. Be sure to talk to financial experts before doing this.
Aim low

Most unsecured creditors will take half or less of what they actually are owed, so you should start low in your negotiations. If you can afford to pay 30 percent, start by offering 10 or 15 percent. The worst thing that can happen is that the creditor says "no." Starting too high may lock you in a position to pay for more than you can handle and leave with feeling like there is no way out. You might be surprised about how low you can go with negotiations.

Use a third party to negotiate on your behalf

Ideally, you would hire a lawyer or another company to negotiate with creditors on your behalf. Such businesses negotiate on your behalf with creditors and can help you get the best of the deal so you can move on from your financial troubles quicker. They know the business more than you do, and they can often get better deals that you wouldn't even come close to on your own. This can help you get back on your feet quicker and not stress as much during the process of becoming debt-free.
Focus on the worst debts

You likely won't be able to negotiate a cut in all your debts, so focus on the ones that will offer you the most relief. Debts with the highest interest rates and those that are the most overdue should be the ones you focus on first. While this is not always true, it is often the best decision to save you more money in the end. Once you have your big debts paid off, you can continue using the same amount of money to pay off smaller debts quicker.

Show evidence you can pay

Creditors will be more likely to consider negotiating with you if there is evidence you will be able to pay the reduced amount. No creditor wants to spend the time and energy negotiating a debt-reduction agreement only to find out the debtor can't pay anyway. Build up the money you need to pay debts and offer to pay your reduced amount on the spot. Creditors may be willing to go lower if they will get the money right away.

Keep in mind that debt reduction and settlement is not a silver bullet. Even if you lower your payments, your credit score will take a big hit and your accounts will be canceled. However, the effort is still worth it if it keeps you out of bankruptcy. If it does come down to bankruptcy, be sure to work with financial experts to help you through the process for the best outcome.


Informational credit to D Thode & Associates.

Four Mistakes to Avoid During Debt Consolidation

Many American families are being financially destroyed by debt. With the recent economic slumps and increases in interest rates, many people saw what they’d thought was manageable debt become a mountain that loomed over their future. Debt consolidation offers hope for people in this situation.

Debt consolidation has certain pitfalls, just like every other financial decision. The following are four of the most common mistakes that people make when going through this process.

Paying More to Consolidate

Many people assume that they will automatically save money in debt consolidation. This is not always the case. While the monthly payments may be lower, they often come with higher interest rates. Even if the interest rates are lower, paying over a longer period of time leads to more interest paid over time. Use an online debt consolidation calculator to see whether you will save money in debt consolidation or end up paying more.

Another way you could end up paying more is by using an inexperience debt consolidation company. Acting too quickly and failing to investigate a company’s claims can result in you paying far more to consolidate your debt than you should. Additionally, this course of action often results in constant harassment from bill collectors, adding even more stress to the debt consolidation process.

Not Dissolving Credit Accounts

If you decide to go forward with consolidating your debt, you would do well to be fully committed. An expert from Faber Inc says it’s much harder to break out of debt when you have credit cards and accounts in use. Immediately after these accounts are paid off, they should be closed. Failing to do this could lead to ending up deeper in debt than when you started. The best way to avoid the temptation to fall back on credit is to remove it completely—this may result in some serious restructuring of your budget, but will be the best move in the long run. 

Using Your Home or Other Major Assets as Collateral

Many people use a home equity loan or refinancing to consolidate their debt. It's easy to see why this sounds attractive. Mortgage rates are relatively low, often far lower than credit card interest rates. However, you are putting your home on the line for an amount of debt that is usually nowhere near its value. If you ever cannot make the payments, you risk losing your home over a relatively small amount of debt. For most people, this is much too risky to attempt if there is any chance that payments may not be met on time. 

Keeping the Same Lifestyle

Debt is often a symptom of a much larger problem. If you routinely rely on credit, you are not living within your means. Examining your average monthly expenditures and using this to create a budget plan is a great way to get started on cutting back. Make changes to your spending and your expenses to avoid acquiring new debt while you struggle to pay off the old. Maintaining these new spending habits will also result in long-term savings and a much healthier financial future. Many people who find themselves deep in debt worry about repeating the cycle for years to come—by forming healthy financial habits now, you can avoid a future in debt.

Debt consolidation can help people to dig themselves out of a hole. Because of this, many people don't pay attention to potential drawbacks of the process. Educate yourself before beginning this process to avoid these common mistakes, and debt consolidation can help put you on the path to a healthy financial future.

Debt Management: Is Settling Right for You?

You've probably heard the claims of companies able to "settle your debt for pennies on the dollar." If you feel like you're drowning in debt, that probably seems like an attractive option. Though the financial relief that comes from no longer having your debt is a huge step forward, the hit that your credit score will take may make you change your mind. Carefully consider all of your options before you make a decision to settle debt.

Debt Settlement Companies

A debt settlement company acts as an intermediary between you and the companies to which you owe money. They'll ask you to stop paying your bills and send them a monthly payment, instead. Part of this monthly payment is a fee to the company, and the other part goes into an escrow account for making the settlement. The settlement company will then contact your creditors and offer to make a settlement.

Perhaps the biggest downside to this method is that you're actively ignoring your bills without telling the creditors what you're doing. All of these missed payments will go on your credit report, where they will stay for seven years. As your payment history accounts for almost 35% of your credit score, even a single delayed payment can drastically lower it. This can be especially devastating for those with good credit. However, the debt relief that can come from settlement is significant and may be the only option for one who has found themselves deep in debt. A bad credit score can be recovered, while debt may increase over the years if it is not taken care of early on. 

DIY Debt Settlement

Another option is to eliminate the middle man and contact your creditors by yourself. To do this, you need to be able to pay the settled amount immediately, so save up a chunk of money or use your tax refund. When you have that money saved up, call the company and make them an offer. Like working with a debt settlement company, this method typically works better when you've missed several payments. At that point, the creditor may have written off your debt, or feel that it's better to take whatever amount they can get. This method may work better on debt that came from a sudden unexpected expense, such as medical expenses. Those who have incurred debt over time, as is often the case with student loans, would do best to seek professional financial advice for their settlement.

Not everyone is equipped to handle their own settlement. Unless you have considerable financial knowledge (and, preferably, a legal background), you should seek professional advice before you go forward on settling your own debts. When it comes to debt and money management, a small mistake can end up costing your for years to come. 

Impact on Your Credit

Not paying your bills has a huge impact on your credit score, and in order for debt settlement to work, you usually have to stop making payments for a while. For example, a payment that's 30 days or more late can reduce your credit score by 50 points. When a payment is delayed even longer—and you have more than one account that's reporting late—the results can be even more significant. The company will also report that you've settled to the credit bureaus, which some might perceive as a risk.

Debt settlement can work for many people, while others should look into other options. Consulting with a financial advisor, who can assess your unique financial situation, is the best way to know where you stand and what option is the right one for you.

Informational Credit to Hudson & Company Insolvency Trustee Inc.

Home Renovations: How to Save Money on Remodeling Your House

Decorating a home doesn’t need to cost you a fortune. Many people take to expensive renovations. However, renovations can prove costly without knowing where to get good deals. By knowing where to look and knowing how to budget you can save tons of money on your remodeling needs.

Stick to a Budget

The first thing you want to do is determine what you want to accomplish for your home remodel. After you have determined what you want to do and where you want to start is to research the costs of each project that you have in mind. Some projects will be more expensive than others. 

Have a budget in mind and stick to it. This will not only help you save money, but it will also help you not to take on too many remodeling projects at the same time. You might even consider taking on one project at a time to make sure that you stay within the boundaries of the budget that you set.

Thrift Stores

Thrift stores present a wonderful way to secure nice items for amazingly reduced prices. Some items can be a few decades old; however, in well-to-do areas, some items may only be a few months old. Those who live in affluent areas are more prone to change the décor in their homes more often. Some items are discarded because they can’t be returned and they are not needed in the home. 

In addition, there are certain nostalgic items that can be found. In the instance a homeowner wishes to do their kitchen in an Americana theme, finding hard-to-get items like Norman Rockwell plates for a lesser price make it possible. Other items may include Coca-Cola décor. In addition, people find authentic pieces as opposed to something that is mass produced, which lends to a customized approach of renovations. 

Repurposing

Repurposing items costs a fraction of the price it would cost to buy a brand new piece. Repurposing items involves taking old items and making modifications to create new uses for these items. People can get lost in trying to make new uses out of things. “Necessity is, indeed, the mother of invention” so it’s not surprising that when people think of a need that they discover how to meet this need. 

For instance, let’s say a baby has become a toddler, and a changing table is no longer needed. However, the parent needs an entertainment center. By making a few modifications, the changing table can be made into an entertainment center. 

Where to Shop

There are various companies that seek out to build homes for the less fortunate. At times, there is a surplus of items from what wasn’t used. When this occurs, they are available to the public for a drastically reduced price. Some stores carry chainsaws, putty, paint, door, blinds and many other household items, such as pottery or paintings, for a reduced price. 

Another route to explore is through Alair Homes as they provide a customized approach at creating a budget according to customer needs. For example, those seeking major renovations in Victoria can set up an appointment with Alair Homes for a seven-step process that involves everything between consultation and construction.

There are endless ways to get things accomplished in the home. Beyond what’s mentioned above, secure coupons. For people who are moving or who have recently moved, there are moving packets available at the post office and other places that have hardware store coupons. 

People can expect to save as much as 15 percent off their total purchase. Simply explore what’s available by going an unconventional route.