Consolidate My Debt
"How do I consolidate my debt effectively?" If you've lowered your monthly expenses, increased your income and created a tight budget and still can't seem to pay off your debt, it's time to talk with your creditors to see if they can arrange a new debt consolidation agreement that works for everyone.
Of course, not every creditor will sit down and discuss options. However, we're willing to be the lion's share do; once a creditor realizes you are in financial trouble but are mature enough to admit it, more often than not they see the benefit in speaking with you. After all, they are in the business of lending money, and understand that a late payment is better than no payment.
Before contacting your creditors, write down all your debts, including the amount, name of creditor, interest rate and current monthly payment. Then, review your budget and determine the amount of money you can afford to pay every month. Do not renegotiate your debts unless you're sure you can pay the new payments!
Separate your debts into two piles: secured and unsecured. Secured debts take priority. List each debt according to the interest rate charged, with the highest interest rates being your highest priority to negotiate. The most important debts to negotiate (and pay down) are your mortgage or past-due rent, car loans, student loans, child support and utility bills. These debts are secured by a form of collateral- either your home, car or personal freedom- and carry the most dire consequences. Start with these first, then move down the list of high interest unsecured debt like credit cards.
There are many things you can ask a creditor to do for you (besides forgetting the debt altogether!). Ask for a few different options, such as lowering the interest rate on a permanent or temporary basis. You could also request a six month period to make interest only payments, or reduce certain fees temporarily until you get back on your feet.
"How Do I Consolidate My Debt Through Negotiation?"
A few words regarding effective negotiating. First of all, realize that creditors are doing you a favor by even discussing the terms of your debt. Remain polite, but firm. Before you sit down with them, confirm how money you are capable of paying each month; this is your absolute bottom line. When you request a change, don't start with your bottom line. Start by asking for more, which you can always give up if they counteroffer.
Don't focus just on the monthly payments; you have other items to bargain with. For example, if your interest rates are too high, you can offer the creditor the right to additional collateral such as your car, snow board or any other assets you might own in exchange for a lower rate.
If you feel uncomfortable speaking with the creditors, speak with a credit counseling agency to see if they can help.
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