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Can You Negotiate Your Own Debt Settlement?

If you’re struggling with high amounts of debt, debt settlement may seem like an appealing option. Debt settlement involves negotiating directly with creditors to pay off debts for less than the full amount owed. While hiring a professional debt settlement company can help, you may want to consider trying to negotiate debt settlements on your own first. Going the DIY route can save you money on settlement fees – but it does require being strategic, persistent, and prepared.

This article will walk you through everything you need to know to try negotiating your own debt settlements, including:

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  • Determining if DIY debt settlement is right for you
  • Understanding the debt settlement process
  • Making settlement offers creditors may accept
  • Negotiation strategies and tips
  • Alternatives like credit counseling or bankruptcy

Let’s start by looking at some key questions to help you decide if a DIY debt settlement approach could work for you.

Is DIY Debt Settlement Right for You?

Debt settlement involves stopping payments on debts so you can attempt to negotiate a reduced payoff amount. This can impact your credit score and leave you vulnerable to collection lawsuits. Before attempting DIY settlement, ask yourself:

  • Are your debts already delinquent? Creditors are more likely to settle debts that are behind on payments.
  • Do you have available funds to make lump-sum settlement offers? Creditors often require this rather than payment plans.
  • Are you prepared for possible legal action from creditors while settling debts?
  • Can you prioritize saving for settlements over other expenses if needed?
  • Are you comfortable negotiating directly with creditors and debt collectors?

If you answered “no” to some of these questions, alternatives like credit counseling or bankruptcy may be better options. If you want to try DIY debt settlement, read on for how the process works.

How Does DIY Debt Settlement Work?

With professional debt settlement, a company handles contacting creditors and negotiating reduced payoffs on your behalf. Doing it yourself means you’ll manage the entire process, including:

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  1. Stopping payments on debts you want to settle
  2. Saving up lump sums to offer creditors
  3. Reaching out to creditors to negotiate settlements
  4. Paying negotiated amounts to satisfy debts

Here’s a closer look at what’s involved with each step:

1. Stop Making Payments

You’ll need to become delinquent on debts before creditors will be motivated to settle. This can lower your credit score, but that will happen with professional debt settlement too. Be prepared for late fees and rising interest rates once you stop making payments.

2. Save Up for Settlements

Creditors typically require lump-sum settlements rather than payment plans. It can take many months to accumulate enough savings to make settlement offers. Prioritize this over any non-essential spending.

3. Contact Creditors

Wait at least 3-4 months of missed payments before reaching out to negotiate settlements. Explain your financial hardship and desire to resolve debts. Be prepared to start with low settlement offers of 40% or less of the amount owed.

4. Pay Negotiated Amounts

Once a creditor agrees to a settlement offer, get the agreement in writing before sending payment. Make sure the letter states payment will satisfy the debt in full. Send a money order vs personal check and keep proof of payment.

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Now let’s look at some strategies and tips to boost your chances of successfully negotiating debt settlements on your own.

Strategies for DIY Debt Settlement Success

Trying to settle your own debts takes patience and perseverance, but these strategies can help:

Start with Small Debts First

Build confidence by beginning with your smallest debt accounts. You can use successful settlements as proof that you can pay when negotiating with other creditors.

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Offer Partial Payments

If a creditor insists on full payment, offer to pay smaller amounts over time. Getting any payments from you is better for them than nothing if you default.

Use a Credit Counselor as Middleman

Nonprofit credit counseling agencies can help negotiate with creditors on your behalf. Fees are often low or waived based on income.

Ask Creditors to Waive Fees and Interest

Getting fees and interest costs removed can significantly lower the settlement amount. Creditors want to avoid “uncollectible” write-offs.

Consider Debt Consolidation

If you have good credit, a debt consolidation loan or balance transfer card can help repay debts faster and at lower interest.

Now let’s go over some tips to keep in mind when contacting creditors and negotiating settlement offers.

Tips for Negotiating with Creditors

Here are some top tips to boost your odds of successfully settling debt yourself:

  • Be honest about your financial situation when explaining hardship
  • Start offers low, often 20-40% of the amount owed
  • Use a polite, calm tone; never argue or threaten
  • Don’t provide personal or financial details not requested
  • If denied, wait 1-2 months before making another offer
  • Consider negotiating medical bills and recent purchases first
  • Get all settlement terms in writing before paying anything

Even if an initial offer is rejected, don’t get discouraged. It often takes multiple tries and gradually increasing offers before a creditor accepts a settlement. With patience and perseverance, DIY debt settlement can help you finally tackle and eliminate debt.

Alternatives to Debt Settlement

Debt settlement is just one option for dealing with unaffordable debt. Depending on your specific situation, you may want to consider:

Credit Counseling

Nonprofit credit counseling provides free budget and debt advice. They can set up debt management plans with reduced interest rates and monthly payments. This helps pay off debt faster without damaging credit scores.

Debt Consolidation

Debt consolidation loans or balance transfer credit cards allow you to combine multiple debts into one payment at a lower interest rate. This can make debts more manageable but may extend the payoff timeline.


While bankruptcy damages credit, it eliminates most unsecured debt entirely through liquidation or reorganization. This provides immediate financial relief but makes future borrowing more difficult.

Everyone’s debt situation is unique. Weigh all options carefully to determine the best path forward. Getting free advice from a credit counselor or attorney can help decide.

The Bottom Line

Negotiating your own debt settlements is challenging but doable with commitment. Understanding the process, using effective strategies, and exploring alternatives allows you to make the most informed choice. While professional help is available, the DIY approach puts you fully in control of resolving debts on your terms.

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