How to Write a Debt Settlement Letter to Creditor for a Low Payment Amount

By | August 10, 2014

When comes to debt settlement, you are normally provided with TWO options. First option is to get a reliable debt settlement company to solve your debt issues. The second option is to take care of this complicated business on your own. In fact, both options also require extra work.

For those who have made the choice to hire a debt settlement company, they need time and effort to look for the best and the most reliable company in the market.

On the other hand, for those who intend to deal and negotiate with the creditors on personal basis, they need extra effort. The first thing they must learn is on how to write a debt negotiation letter to their creditors in order to request for a lower repayment amount.

You have to bear in mind that convincing your creditors to settle your debt at a lower amount is more difficult than you might think. However, if you do it tactfully, it can be done successfully.

First thing first, before you start sending out letters to your creditors, you are advised to weigh all the pros and cons of self debt negotiation carefully. If you don’t really understand the process of debt settlement, you are advised to contact the debt settlement companies or lawyer for clearer clarification.

Here are some practical tips on how to write a legally binding debt negotiation letter:

  • Before writing the letter, you need to do some preparations. You need to understand the terms and conditions of all your debts. These include the repayment amount of each debt, interest rates, outstanding balances, surcharges, taxes, etc. Knowing the exact figure of how much you owe gives you a better picture of how much reduction you can ask from your creditors. You are reminded that if you offer to pay too little, most creditors will not consider your letter seriously. It is suggested to pay your creditors 70% to 80% of your total debt.
  • Make sure you have sufficient fund allocated for settlement before you get your settlement request in writing. To play safe, you are advised to hire a lawyer or debt settlement consultant to check for any inconsistencies or unnecessary statements on the letter.
  • Post the letter and wait for the reply from the creditor. You may fail in your first attempt but you can keep trying by offering a relatively higher repayment amount until your creditors approve your request.
  • You should then follow up with your creditors to find out whether there is any agreement required to ensure that the settlement process is completed.
  • After you have obtained the letters or documents from the creditors stated on the reduced amount, start making your payment in full and on time. After payment has been made, you can then request for an official written receipt from your creditors.
  • It is important for you to keep a record of all the correspondence with your creditors. Bear in mind that verbal agreement or conversation through the phone is not valid.

Last but not the least, we have to accept the fact that creditors may not be legally required to assist you, but if you show your sincerity and get yourself prepared financially to achieve the settlement, your creditors may be encouraged to work with you.

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