You’ve secured a personal loan, but now your financial situation has changed. Negotiating a debt settlement on your own could be the cheapest and fastest way to eliminate debt.

DIY debt settlement is the process of negotiating with creditors directly, without the help of a debt settlement company or other third-party company. This means that before you choose this debt relief option, you will need to know how to negotiate with creditors for debt settlement. With our DIY How-To guide below you will learn what it takes to negotiate your debt down to a lower amount.

In general, this type of personal loan settlement strategy works best if you have debt that is already delinquent and are risking bad credit. Depending on your specific type of personal loan, negotiating debt settlement can become an option after your payments are more than 90 days late. Creditors will also start responding differently after 30 days, 90 days, 180 days and beyond – this may help you determine if it’s the right time to pursue a personal loan settlement option.

How to Negotiate Debt Settlement on Your Own

DIY debt settlement requires taking several key steps in order for to be well prepared to negotiate a personal loan settlement on your own. We’ve broken down the key factors for negotiating a debt settlement on your own below, which can be a quick and low-cost way to eliminate debt from a personal loan.

DIY Debt Settlement: A Step by Step Guide

Step 1: Determine if Debt Settlement is a Good Idea for You

The first question to understand when determining if settlement is right for you is: When is debt settlement a good idea? This type of debt relief is a good idea to consider if you are currently facing delinquency on a large amount of unsecured debt, such as a personal loan. This is because you may not be able to negotiate with creditors until your personal loan is delinquent for 90 days or more.

The longer you’ve been delinquent, the greater chance you have of being able to settle your debt with a creditor on your own. For example, if you haven’t made a payment in over six months, you’ll be much better positioned to reach a negotiation with a creditor.

Other questions to ask yourself before determining if you’re a good candidate for DIY settlement:

  • Do I believe in my ability to negotiate a debt settlement?
  • Can I save enough money for a lump sum payment?
  • What’s more important: My credit score or living debt free?

Step 2: Save Money and Prepare for An Amount That You Would Like to Ideally Settle For

By maximizing your cash savings you’ll be best positioned to negotiate personal loan debt settlement on your own. The majority of creditors will expect a one-time lump sum payment in exchange for settling your debt, however some may offer payment plans instead. Your goal should be to save up as close to half of your balance as possible, as most creditors will be willing to settle for about 40-50% of your total debt amount.

If you don’t think saving 50% of the balance is realistic for your financial situation, saving as much as you can and making a lower initial offer to a creditor will be a good idea. This way you will have room to negotiate if the creditor comes back asking for a higher number. With this tactic in mind, you may need to spend more time negotiating with a creditor until they are willing to settle your personal loan.

Step 3: Get the Finalized Deal in Writing and Hold Up Your End of the Bargain

After negotiating the personal loan settlement with your creditor and achieving a verbal agreement, it’s vital that you get the specifics of the deal in writing. If you don’t get the specific terms of the settlement deal in writing, it’s important to hold off on making any type of payment to your creditor.

After all your hard work, the last thing you want to have happen is to hand over an agreed upon lump sum payment, only for the creditor to not hold up their end of the deal. Once you receive written proof of the personal loan settlement, then your final step should be making a payment to settle your personal loan debt.  

Are Debt Settlement Companies A Good Option?

While negotiating debt settlement for a personal loan can be a good idea, a DIY debt settlement may be more challenging than working with a professional company. Regardless of financial background, education, or situation, a debt settlement company can help you reduce your debt by more than half in many cases.

By having professional negotiators on staff, the amounts that they are able to get reduce are often much greater than what an individual can accomplish on their own. So not only are you getting your debt significantly reduced, but you’re also eliminating your interest helping you not waste more than half your money while at the same time getting you out of debt quicker than any other way.

Want to save even more time and money? Get assistance from one of several top debt settlement companies who have professional negotiators on staff ready to help you settle.