How to Settle Debt Without a Debt Consolidator

How to Settle Debt Without a Debt Consolidator

Getting back on your feet during hard times can feel downright impossible, especially when creditors and collection agencies are calling night and day wondering where their payments are.

As you sit down to try and figure out the best possible way to satisfy all of your debt, the notion of consolidation seems appealing. After meeting with a debt consolidator and compiling all the information, they work out a loan agreement that covers the cost of your debt, then settle with your creditors.

It sounds like a dream come true, especially when you’re struggling financially, tired of the phone calls and looking forward to one low monthly payment designed to help you get yourself out of the hole. But did you think about the massive interest the debt consolidator collects in the end? In many cases it’s a number most of us can’t afford.

What many of us don’t realize is the willingness of our creditors to work with us toward settlement. In cases where you owe a lump sum of past-due debt, the original creditor is often willing to settle for half of the amount owed if you are able to pay it all at once. Even if they don’t want to settle for less than what you owe, they will work with you to set up a monthly payment arrangement.

Before you even get started making arrangements with creditors, you need to find out exactly who and how much you owe. You can find out what you owe by obtaining a free copy of your credit report from one of the three Credit Bureau approved services, Experian, TransUnion and Equifax. As a consumer you are entitled to one free copy of your credit report from each one of these services once per year.

After you have your credit report in hand, sit down and make a list of each creditor and the amount you owe in order to satisfy your debts. This also includes debt that has been turned over to collection. Beside each creditor write their contact information.

Create a budget based on your total monthly income. Subtract the amount you pay out each month to meet your basic needs. The final number is what you have left to work with when you’re ready to approach your creditors. Divide that number by the number of creditors you owe money to and you have a fair and equal amount you can offer each creditor in the way of a final settlement or monthly payment.

Contact each creditor individually and present them with your offer. Make sure you note that all of your creditors have been offered the same amount and the first ones you will pay each month are those who accept your offer.

Once you have a payment agreement set up with each creditor, pay as you agree each month until the debt is settled.

It may sound like a lot of work, but in the long run it’s easier on your budget than an outrageous amount of interest paid on a debt consolidation loan.