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4 Steps I Used to Negotiate Debt and Save $6,500 - YouTube
Channel: Let's Talk Money! with Joseph Hogue, CFA
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If you just can’t make your payments, there
is a way to cut the amount of debt you owe
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in half and keep it from destroying your credit.
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By the time you finish this video, you’ll
have the step-by-step process I used to negotiate
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debt, wiping out $6,500 from a $10,000 debt
owed to credit cards and a signature loan.
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We’re talking the debt negotiation process
today on Let’s Talk Money.
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Joseph Hogue here with the Let’s Talk Money
YouTube channel.
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I want to send a special shout out to everyone
in the community, thank you for taking a part
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of your day to be here.
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If you’re not part of the community yet,
just click that little red subscribe button.
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Today’s video is the ninth in our debt payoff
series, an entire series on ditching your
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debt from creating those goals that are going
to motivate you to some tricks I’ve learned
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to pay off debt.
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Think of it like a TV series, at the end of
this season, you will have all the tools you
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need to finally get out from under that crushing
debt.
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Make sure you subscribe so you don’t miss
any of the episodes.
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I’ll also be putting these videos in a special
list in the Playlists section of the channel
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and link to it in the video description below
so you can watch the series in order.
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We have covered an insane amount of information
in the series.
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I shared a complete debt payoff system, a
unique unbudgeting method that finds extra
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money in any budget and we’re three videos
into boosting your credit score so you never
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have to worry about rates again.
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I would love for everyone to be able to use
this system to pay off their debt as fast
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as possible and be done with it.
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But it just isn’t going to be that easy
for everyone.
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If you’ve just gotten too far over your
head, there may be no way you can make your
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monthly payments.
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That’s when you need to consider debt negotiation,
working with your creditors to pay what you
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can and wipe out the rest.
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I’m going to share the exact process I used
in 2009 for negotiating $10,000 in credit
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cards and signature loans down to $3,500 so
I know it works.
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I’ll show you the two best times to start
negotiating, whether it’s with a lender
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or a collection agency.
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I’m also going to give you some ammunition,
a list of things you can ask for in the negotiation
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and the answers to the most common rejections
you’ll hear.
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We’re going to get to all of that but I
want to warn you about two things right now,
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two huge traps for anyone in your situation.
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That’s bankruptcy and debt settlement companies.
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First, I know bankruptcy can seem like a great
idea.
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Just wipe everything clean and start over.
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It is NOT that easy.
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Bankruptcy stays on your credit report for
10 years.
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Any credit during that time is going to be
at astronomical rates and it’s actually
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going to end up costing you more than the
debt negotiation process we’ll talk about.
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Second, debt settlement companies are going
to do exactly what I’m going to show you
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how to do in this video…except they’ll
charge you a minimum of $3,000 to do it and
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it will take three years or more.
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I worked part-time as a credit counselor while
getting my degree, those debt negotiation
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companies are useless and only out to take
what money you have left.
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Alright, now that you can avoid the two biggest
traps, we can get started with the good stuff.
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I’m actually excited.
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This isn’t a great situation to be in but
understanding this process is going to get
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you to a good place.
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You’re going to finally be able to get on
your feet, get out ahead and you should be
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excited about that.
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Let’s look at the big picture of debt negotiation
then I’ll break down each step.
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There are four steps here; Understanding your
debt situation, Getting your information together
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for each loan, planning your negotiation strategy
and finally negotiating.
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What, you thought it was just about picking
up the phone and asking the credit card company
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to take less than you owe?
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If creditors made a habit of just cutting
people’s debt anytime they asked…well,
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they’d be out of business pretty soon.
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No, real debt settlement, professional debt
negotiating means mapping out a strategy.
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Taking a couple of hours to know your strengths
and how to hit the creditors’ weaknesses.
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Think of it this way.
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If you spend three hours on this and get even
60% of ten grand in debt wiped out, you just
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made $2,000 an hour.
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That’s like Bill Gates money!
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Makin’ it rain there with Branson.
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First here is just to understand why you are
in so far over your head.
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Was it a one-time emergency expense or maybe
a habit of overspending?
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Even wiping out your debt isn’t going to
help if you just get back into debt.
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Run through the unbudgeting system that we
talked about in the second video of the series.
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This is going to make it easy to track where
your money is going then you can use some
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of the tricks in the third video to see how
much money you really have each month.
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This is going to be important because it will
tell you how much of your debt you can pay
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off and how much you’re going to need to
settle.
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You might want to get the help of a credit
counselor.
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This is usually a free service of a non-profit
group associated with the state government
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but steer clear of anyone that wants to settle
your debt for you.
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You’re going to do that yourself and save
a few thousand.
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Now you go through your credit report and
bills to get all the information you can about
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your debts.
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This is going to include; the name and address
of each creditor, whether it’s been sold
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to a collection agency or still with the original
lender, amount owed, payment history and any
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fees being charged.
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That point about who holds the loan is an
important one.
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Lenders will usually sell their bad loans
to a collection agency after 3 to 6 months
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of missed payments.
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They might get only $0.10 on the dollar so
offering more is going to be important in
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our negotiating strategy.
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They might also just hire the collection agency
to harass you for a fee.
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So it’s important to know who you need to
talk to when you start negotiating.
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Now you’re ready to plan your negotiation
strategy.
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You’re a debt general standing above this
map of all your debts and planning where to
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attack, where your creditors are weakest.
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Part of debt negotiation is knowing when to
start negotiating.
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Negotiating with original lenders is usually
best started when you’re around 90-days
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late.
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That’s a month or two before they look to
sell your debt to a collections agency so
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a lot of times, they’ll be willing to take
that $0.30 on the dollar rather than only
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ten cents from an agency.
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If you have debts already with a collection
agency, you need to understand the statute
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of limitations on debt in your state.
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That’s the amount of time, usually between
three to six years varying by state, that
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a collector can legally collect on a debt.
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We see here in a map from the site WalletHub.com
the statute of limitations on credit card
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debt for each state.
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So if you live in states like Mississippi,
New Hampshire or the District of Colombia,
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you’re in luck because companies can only
collect on that debt for three years.
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If you’re in Illinois or Iowa like myself,
you’re SOL because it’s up to ten years.
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Now this time limit starts after the last
payment you’ve made, not when you got the
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loan.
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If you make a new payment, even a partial
payment, then that starts the clock over.
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So if you haven’t paid on a debt for three
years and the limit on collections is four
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years, the agency trying to collect on that
debt is going to be extremely willing to negotiate.
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I’m not saying you always want to wait for
years, not paying that debt, just to give
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yourself bargaining power but it is an option.
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Of course, you’re probably thinking, if
you wait for years not making payments, why
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not just let that time limit lapse and not
pay the debt at all?
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Why even bother negotiating?
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Well, because that defaulted loan is going
to hang on your credit report and kill your
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score for five to ten years.
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In a minute, I’ll show you a way to get
the bad mark, those years you didn’t pay,
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taken off your report and boost your FICO
fast.
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You also want to strategize whether you’re
going to offer lump-sum payments for your
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debt or a payment plan.
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You can get bigger discounts, like paying
just 30% of what you owe, if you agree to
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send a check for that amount all at once.
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Offering to start a payment plan and you might
have to pay more, like 50% or 60% of what
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you owe.
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That’s what I did in 2009 when I renegotiated
my debt.
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I offered to cut them a check for 35% of what
I owed.
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Well, actually I started at 20% and then negotiated
from there but we’ll get to that next.
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Once you’ve got all this laid out, you’re
ready to start making some phone calls and
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negotiating your debt.
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Please, please, please do not skip those prior
steps.
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If you just skip everything and call your
creditors, asking them to take less than you
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owe, it isn’t going to work.
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They will know when you haven’t prepared
because you won’t know any of the info we’ve
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talked about and you won’t be ready for
any of their questions.
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The best negotiating strategy is what I call
the let’s be friends strategy.
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This is where you present yourself like you
want to be fair, you want everyone to come
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out with something.
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You start the conversation explaining your
situation, how an emergency forced you into
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this and you’re just trying to make it right.
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You explain that bankruptcy may be the alternative
if you can’t work something out and may
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be unavoidable but you’re trying to pay
what you can first.
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This sets your creditors up with a sense of
urgency.
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They’re thinking that they better get as
much as they can quickly before you file bankruptcy.
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Of course, there are other negotiating strategies.
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A popular one is the hard-line threat where
you go in arguing the debt wasn’t fair,
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maybe that you didn’t understand the terms
or that you were manipulated by the lender.
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You then put on the table as many demands
as possible and then start negotiating back
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from there.
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This is a favorite tactic of one famous negotiator,
sometimes it works and sometimes it flops.
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It’s tough making it work unless you are
in a position of power or have some kind of
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legal claim on your side but it’s another
strategy to consider.
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Speaking of demands, besides your overall
strategy, you want to have several small items
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for which you can negotiate.
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Just calling in asking that a lender take
less money is going to get a very quick one-word
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answer.
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A few of the things you can ask for besides
a discount in what you owe include; asking
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all fees to be waived, asking for bad marks
to be removed from your credit report including
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that the debt was sent to collections, asking
that the account be closed and marked as satisfied
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or paid as agreed on your credit report.
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This is all about having different things
you can give and take in the negotiation.
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If they say they will not write the credit
bureaus to have those missed payments removed
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from your report, that’s fine, you come
back with a lower offer on the debt.
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Maybe if they agree to all these items, you
agree to pay a higher amount.
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One thing you absolutely must remember in
all of this is to get everything in writing.
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Use an app on your phone to record the conversation
and get all agreements in writing before you
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make any payments.
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These collection agencies will screw you over
if you let them!
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DO NOT make a single payment EVER until you
get that signed agreement in the mail or email.
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It’s a long process negotiating debt but
please do not skip over it.
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Click that subscribe button and come back
to the video if you need to but do not pass
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up the chance to save thousands on your debt
payoff.
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Now 150 million Americans had their credit
report hacked last year and that was just
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from one hack.
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Next video, I’m going to show you step-by-step
how to freeze your credit so hackers can’t
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touch it.
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Make sure you click on that subscribe button
so you don’t miss the rest of the videos.
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Click on the link just below this video to
watch the entire debt payoff plan and get
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out from under your debt.
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