8 Simple steps to settle and reduce debts on your own

It's difficult to accept the fact that you're in debt. It may seem all the more difficult to negotiate with debt collectors, especially if you fear the scare tactics often used by them. You can work with professionals in order to settle your debt. However, it is not that intimidating to follow a few steps and bring down the outstanding balance on your own.

Why does it makes sense to negotiate on your own?

DIY or do it yourself debt settlement makes sense because:

  1. It's a practical solution since no one else knows your financial situation better.
  2. It's a viable option since you don't have to pay any additional fees.
  3. You don't have to waste time in searching for legitimate settlement companies.
  4. You won't have to live in fear that you'll get scammed.
  5. Creditors are more comfortable in working with you.

Apart from the above mentioned reasons, there is one more reason why it is better to go for do-it -yourself debt settlement. Several professional companies have gained bad reputation in the last few years because of the following reasons:

  • Having the objective of attracting more customers rather than assisting debtors.
  • Intentionally or intentionally not disclosing the actual terms and conditions of the agreement.
  • Making impossible promises to make more money.
  • Charging fees even before working with creditors.
  • Misrepresenting facts to debtors and compelling them to miss out payments.

How can you settle debts on your own?

You can settle debts on your own in the following ways:


  1. Have a basic knowledge: You need to have at least the basic knowledge about your debt situation for initiating the negotiation process. You can gain the basic knowledge from your credit report and the available balance in your checking account. You'll need to go through all the financial documents. Have the basic idea about what debt settlement is, what your creditors or collectors can or can't do during negotiations, how various actions may make it easy for you to negotiate with creditors and get back your financial freedom fast.
  2. Make a draft of the plan: Once you've acquired knowledge about your credit situation, its time to prepare your own settlement plan on the basis of the following factors:
    • The number of your past due accounts
    • How much you've to pay your creditors
    • The amount you earn every month

    Decide the maximum amount you can pay on each account. This will be extremely helpful when you start the negotiation process.

  3. Create a back-up plan: It'd be a mistake to create only one settlement plan. Create a few backup plans too. If the plan A doesn't work, then use the plan B. Consider some other debt relief plans too.
  4. Stop making payments and save: Making payments to your creditors basically indicate that your financial situation is good. They'll think that you can afford to pay off the debt.

    If you want your creditors take your settlement offer seriously, then what you need to do is stop making payments on the delinquent accounts. Save that amount in an account. You need to a save a sizeable amount in order to make a reasonable settlement offer to creditors.
  5. Make a low bid initially: Don't think that creditors will accept your very first settlement offer. Your starting bid should be low as creditors are most likely going to counter it. If the creditors accept your first offer, then you'll certainly get a very good deal. Make sure you don't make a too low bid as creditors may reject your settlement offer altogether.
  6. Look at the alternatives: If your creditor is not happy with the offer, then make a counter-settlement offer soon. Let the creditor know that you're contemplating bankruptcy if all the options to settle debts are closed.
  7. Don't succumb to pressure: A lot of times, debtors are forced by creditors to accept an offer that is beyond their affordability. Try to avoid succumbing to pressure for it won't be good for your financial health. On the other hand, find out your chances of getting sued by the creditors. Make a decision on the basis of that.
  8. Get a written agreement: Once you've had a final discussion with creditors, get a written agreement from them wherein the terms and conditions of settlement are clearly written. Check if the payment date and the settlement amount are clearly stated in the agreement.

What are a few tips to reduce debts on your own?

Here are the few tips that you can use to settle debts with creditors.

  1. Use a debt calculator and find out how much you can pay to your creditors.
  2. Have immense patience since several creditors may not be easy to work with.
  3. Prepare a budget and start saving money.
  4. Forget about your wants and focus only on your needs.
  5. Save an amount in the emergency fund so that you can be debt free fast.

Final word

Last but not the least, do remember at least 3 things about debt settlement.

  • You've to pay an extra amount for the amount forgiven by creditors. You'll have to pay tax to the IRS.
  • Your credit score may fall as you're not making the full payment to the creditor.
  • Usually, creditors are willing to work with you when the account is delinquent.



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