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Settle Your Debts to Help with Mortgage
If you are having difficulty paying your bills, you can settle your debts, keep your mortgage current, and even reduce your total mortgage debt.
When Debt Becomes Oppressive
When you are struggling each month to pay your bills, life is no fun. In fact, the anxiety and worry over debt can create stress, depression, family discord and many physical ailments. You need to do something. It is possible to settle your debts without affecting your home ownership, your mortgage, and, in fact, put yourself in a position of reducing that mortgage debt even faster.
How Debt Settlement Works
You must first be late in your payments to creditors, as much as 60-90 days, before said creditors will consider negotiating. During this time, you should not be late with your mortgage payments. That is the one debt that is attached to the largest asset you have, and you do not want to put it at risk. Creditors will begin to call early in this process. Take the calls, explain that you cannot pay right now and state that you do not know when you can make yourself current on the debt. Do not promise payments. Do not tell them you will consider taking equity out of your home.
When debt reaches 90 days, your creditor will threaten turning over the debt to a collection firm. Do not panic. You can settle with a collection firm just as easily if you have the knowledge, the tools of the process and the stamina to see it through.
Begin with your creditors if they are still holding the debt. Call them. Offer to settle for 50% of the amount of the debt. They will probably say no at first, but be persistent. Many individuals have settled for 50% with major credit card companies. Once the settlement is reached, work out payment arrangements that you can afford.
If the debt has been transferred to a collection firm, do not talk with them on the telephone. Insist that all communication occur in writing, and specifically tell them that they are not to call you at work. All letters you write should be sent registered mail, return receipt requested, and you must keep a copy of all correspondence. If the debt has been only transferred to the collection firm, they are working on a percentage basis, and you can use the same negotiating tactics and percentages you would use with the creditor. Anything they get is better than nothing, so you are in a strong position.
If the debt has been sold to a collection firm, you are in an even stronger position. The firm has purchased your debt for pennies on the dollar, and you may be able to bargain as low as 25-30%. Go for it. The worst they can do is say “no.”
Once the Settlement is Reached
When you have obtained settlements from all of your creditors and have either established payment plans or managed to pay off the settled amount completely, you have more money in your pocket each month. Put this money to good use for a change. Apply it to your mortgage payment in the form of increased principle payments. The more you can add to a mortgage payment each month, the faster you will pay off this mortgage, saving yourself thousands of dollars over the life of the loan.