Many people struggle to climb out of debt once they fall into it. The interest costs become too much, leading to debt that either stagnates or increases.
Fortunately, if you’re in this situation, you may be able to cut down on your debt simply by asking.
Enter the debt reduction letter, also known as a debt negotiation letter. This is a formal letter you can use to request that your debt be reduced in some way.
Since you’re dealing with money owed here, you need to nail the letter to be successful. Here are some tips for writing an effective debt reduction letter.
1. Understand Your Debt’s Terms
Remember, you’re dealing with a serious topic here. You need to understand all the terms and conditions surrounding your debt. That includes items like
- Interest rates
- Fees
- Taxes
- Term lengths (if applicable)
Knowing these pieces of information helps you understand what you’re talking about when you get to writing your letter.
2. Add Up Everything You Owe
On that last point, you also want to know the total debt you currently owe to your creditors.
Add up your total debt among each creditor and make a note of that. Then, sum it all up for your grand total.
With these figures in front of you, you can now check if you’d have the funds to pay off a reduced debt amount. Many creditors settle in the 30-50% range of your total debt, so make sure you have that amount available.
3. Avoid Threatening Language
Unfortunately, you don’t have the upper hand in negotiations here. Being aggressive won’t work. You owe the creditors, after all.
Consequently, don’t use threatening language. Primarily, don’t state that you’ll declare bankruptcy. This won’t help you get your settlement.
In fact, some creditors will ramp up their efforts to get their money from you if they do suspect a bankruptcy filing. You’ll be dealing with more harassment and possibly lose your chance of a settlement.
4. Have a Lawyer or Debt Negotiation Counselor Take a Look
Since you’re dealing with a legal topic — debt settlement — you should have a professional take a look.
A lawyer or a debt negotiation counselor should suffice. They’ll make sure your letter is airtight and not missing any crucial information.
