Debt Consolidation

6 Things To Keep In Mind While Writing A Debt Settlement Letter

If you are considering writing a debt settlement letter to your lenders so that you can get rid of your debt problems, you have to be very careful in your approach. Settling your debts through such programs can be a very effective way, but it is very important for you to keep in mind that such options are not available to all debtors. There are certain specific criteria that you must meet in order to qualify for these programs. There are plenty of factors that you need to take into account in this regard. By writing this letter, you are actually requesting your lenders to accept a reduced amount of money as a full and final settlement of the entire debt. It is only when the lenders get convinced that there is no better way for you to pay off your debts, they may agree to such proposals. This is because even your creditors do not want you to go for bankruptcy, which is probably the only option available to you if the debt settlement thing does not work. In bankruptcy, lenders fear a greater loss. That is the reason they may agree to bear a smaller loss by accepting a debt settlement proposal. Thus, you have to write this letter in a way that can effectively convince the lenders to give your proposal a serious consideration. Following are some of the very important things that you need to keep in mind while you are writing it.

Let Them Know You Are Considering Filing Bankruptcy

Your debt settlement letter can have a better impact on your creditors if you let them know in the very beginning that you are going through a serious financial hardship and that you may have to consider bankruptcy if you do not get any better alternative to get rid of your debts. With this information right in the very beginning, the lenders will definitely take interest in your letter. Just make sure that you have to tell it in a very decent, humble, and genuine tone. If you use a threatening tone, it may just work against you and eventually your letter may end up having its grave in the dustbin at the lender’s office. The idea is to convince them about your difficult financial situation, not to threaten them to accept whatever proposal you are offering.

Show Proofs Of Your Poor Financial Situation

In order to convince your lenders in a more effective way, you are also advised to attach proofs of your poor financial position in your debt settlement letter. Things like job loss because of certain medical conditions or accidents must be explained clearly with all documental proofs. Debtors that are struggling with such hardship usually have a higher chance to get approved for a debt settlement offer. However, it does not mean that you have to be in such a poor state to qualify for debt settlement. Even if you have your job in tact and are not going through any medical problems, you may still qualify for it provided you succeed in convincing the lenders that you have no better way to handle your debt problems.

Make A Proposal

After the above two steps, the last thing you have to do is to make a proposal. Here, it is very important for you to keep in mind that the first proposal often gets rejected. The chances are that the lenders will either make a counter offer or give you a chance to make a second proposal. Therefore, when you write a debt settlement letter, you must make your proposal accordingly. In these types of cases, lenders often agree to settle the entire debt by accepting somewhere around 50% of the total outstanding debt. You can request them to accept lower than 50%. If they reject you proposal, make se second offer and increase the amount you are willing to pay. After some negotiation effort, the lenders are likely to accept a deal where you will be allowed to settle your entire debt by making a much smaller payment. Depending upon your specific case and your negotiation skills, the lenders may even provide you the option to pay off the reduced amount in small monthly installments over a certain period of time.

Though things do not look very easy in writing, practically, it is much more difficult cracking a hard nut. Therefore, it may be a wise idea to work with an expert credit counselor to assist you in how to write a debt settlement letter to your lenders.


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