The recent economic downturn has taken many of us by surprise. For those who live paycheck to paycheck, it was even a bigger surprise as many companies had to either lay off some employees or permanently cease operations. Bills keep piling in and whatever money we have left keeps decreasing. Below are some tips that can serve as a guideline to negotiate and settle debt.

1. Try starting with the accounts that have lower balances

It can be much easier for creditors to forgive debt in smaller amounts. Try talking to your creditors about ways to reduce and pay off these small balances first. Once this step works, move to the next account.

2. Start with the habit of creating a budget

When you do this, you can better see where your money goes and when you need to tell creditors why you cannot pay them this will help to prove your point. Once you have a budget, creditors too can find out how much you can actually pay them (or if you are unable to pay).

3. Know your limits

If you are going to make an offer to settle your debt, make sure you give a number (amount) that you can afford. Do not go over your limit and do not ask them what amount they would prefer as it might not be what you can afford.

4. Show determination

You should make it known to your creditors that you really intend to pay back your debt, so make sure that you sound confident.

5. Explain your goals

Try making your creditors understand your goals, such as getting your finances in order or improving your credit score, if they do not know what your problem is, chances are they might not be sympathetic towards your situation.

6. Tell them what they stand to gain

The best way to make them listen is to tell them how they would benefit from your debt settlement. On their part, they will not need to get a collection agency to collect your debt for them, they will thus save money as they will not need to make payments to the collection agency and they will also save money as they can avoid suing you and taking you to court.

7. Mind your manners

Your creditors are NOT obligated to help you. Remember that. They are just collecting debt and are paid to do so. Therefore, to influence their decision and improve your chances for debt negotiation or settlement, be polite and choose what you say carefully.

8. If at first you do not succeed, try again

Do not be easily disheartened, show some effort and determination. If your first try does not yield the results you expected, wait a month or two and try again. Remember, it is also in your best interest to settle debts as quickly as possible.

What you should also remember is, you got yourself into this mess and you should try and get yourself out.

Put in the effort, time and energy and with some luck, it might just payoff!