If you’re like most Americans, you’ve received at least one bill in the mail that’s left you wondering: “How am I ever going to pay this balance?” Perhaps you’ve been left with the bill for an unanticipated one-time expense, like a costly medical procedure. Or, perhaps your credit card debt has simply been rising over time, and the balance has grown larger and larger until it seems simply unpayable.
It’s important to remember you’re not alone in feeling overwhelmed by your current level of debt; this is a very common experience that can happen to anyone. As USA Today reports, based on data from NerdWallet and the Federal Reserve, the average American household carries almost $17,000 in credit card debt, nearly $30,000 in auto loans and more than $182,000 in mortgages.
Debt is simply a way of life at this point. But it starts to become a problem when consumers aren’t sure how they’re realistically going to pay it back.
Here’s what many people don’t know: Your creditors may actually be willing to negotiate on debt. One reporter who worked at a debt collection agency even writes that a balance “is like the sticker price on a car—a starting point for negotiation.”
Why Creditors May Be Willing to Negotiate
That’s right, the number you see at the bottom of your statement isn’t necessarily set in stone. You may be able to settle your debts for less than the original amount or get new payment terms on the amount you do owe.
Is this news to you? It was to Andrew Housser, financial expert and co-founder of Freedom Debt Relief. He had no idea creditors were oftentimes open to negotiating and settling debts for a fraction of the original balance—that is, until his friend told him how he’d settled $30,000 in debt for about $9,000. Realizing that he’d been “in the dark” on this key information, along with many other consumers, actually motivated him to start a debt settlement company to help clients do just that.
There are a few reasons creditors may be willing to negotiate. Collection agencies who purchase debts typically do so for a significantly reduced rate. So, these organizations would only need to recoup a fraction of the original debt to make a profit.
There’s also the risk that they’ll get nothing from consumers who are unable to make any payment whatsoever. It may be in everyone’s best interest to reach an amenable agreement; you get off the hook without having to pay a sky-high balance, they receive at least a percentage of the original debt.
Creating a Strategy for Negotiation Success
Some consumers decide to take the reins on negotiations themselves. Others elect to enroll in a debt settlement program where trained negotiators reach out to creditors on their behalf. The strategy you choose will depend on factors like how much you owe and what kind of debt you carry, of course.
Here are a few debt negotiation tips from NOLO to consider as you strategize:
- Start low, offering around 15 percent of the balance. Many creditors will settle for between 30 and 50 percent, but you don’t have to start there right away.
- Suggest you may have to file for bankruptcy, a situation in which your creditor would get little to nothing.
- Have funds ready to make the payment in a timely manner. The sooner you can transfer funds, the more appealing your settlement offer will be.
Now that you know creditors may be willing to negotiate on the amount of debt you owe, you can explore strategies for hopefully reaching a favorable settlement. This will help you repay your debts faster, and with less financial impact.