So you’ve gotten into debt – trust us, you’re not alone. The average American has more than $15,000 in credit card debt, and today’s struggling economy leaves many relying on credit just to meet basic needs.

Often, creditors are made to look like the “bad guys” – demanding payment from consumers without regard for their unique circumstances. The truth is, it’s up to the consumer to manage their personal finances, not the creditors. More than 36 percent of consumer debt is tied up in credit cards (with the remaining 64 percent in loans, such as car loans, student loans and mortgages), and if creditors bent the rules for everyone, they’d be out of business. However, there are steps you can take to show creditors that you are trying to work with them to pay down your debt in a way that meets both of your needs.

• Be proactive. Call your creditors and explain your circumstances. Taking initiative and being honest with creditors – while agreeing to pay what you can and developing a timeline to return to full repayment status – can go a long way. Don’t wait until your debt is so heavy that creditors will be reticent to deal with you – showing your history of on-time, full payments will help your case.
• Create a mutually-beneficial repayment plan. Often, creditors will accept a lump-sum payment or altered monthly payment plan. A lump-sum payment is when you pay less than the full amount owed – commonly achieved through debt settlement. An altered monthly payment plan is where you agree to make monthly payments different than what’s listed in the original repayment agreement (such as a lower minimum installment or with a fixed, lower interest rate) until the account is paid. If you choose this option, be sure the creditor agrees to remove any negative statements from your credit report upon completion of the payments.
• Know your rights. Collections professionals are trained to use complex legal jargon and intimidating language to get you to pay the full amount owed under the creditor’s terms, not your own. Know that creditors cannot have you thrown in jail, threaten you unethically, contact you between 9 p.m. and 9 a.m. or contact your friends, family and neighbors.

 If you don’t feel comfortable negotiating with creditors yourself, or find that your efforts are not successful, consider the help of a professional debt settlement organization – just be sure you do your research to find one that will act with your best interests (and the law) at heart.

This entry was posted on Friday, June 18th, 2010 at 4:27 pm and is filed under Tools and tips. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.