Funds for Debt Negotiation and Debt Settlement

Debt negotiation, also known as debt settlement or debt reduction, is an increasingly popular option for consumers who are seeking ways to climb out from a mountain of credit card debt. By negotiating the balances of your credit cards and not just the interest, consumers can reduce their debt levels by up to 40-60 percent of the amount owed. In order for a debt settlement program to be effective, however, funds must be readily available to settle a debt when a creditor has agreed to lower the principal balance. The following is a list of the 7 most popular ways to come up with the money necessary for settlement.

1. Cut expenses – Perhaps the most obvious way to find funds for lump sum debt negotiation, cutting your expenses is the first step one should take in order to accrue the savings necessary to settle your debts. By better budgeting and eliminating any superfluous or unnecessary expenses, one may be able to find the money you need in order to settle your unsecured debt.

2. Cash Out Refinancing – This is another common way to find the funds for debt negotiation, but it should only be considered if you are certain that your new mortgage payment will be affordable and your interest rate or any other costs associated with the loan are reasonable. By refinancing a consumer can take out a mortgage for greater than their current balance, pay off their first mortgage, and then use the extra money to fund their debt settlement program.

3. Get a Home Equity Loan – Also known as a second mortgage, a home equity loan allows you to use the equity in your home to fund a debt negotiation plan. This is different from refinancing in that you don’t get an entirely new home mortgage, just a smaller, secondary loan against your equity.

4. Income Tax Returns – Another popular method for funding a lump sum debt settlement program, income tax returns are very useful when negotiating your debts. Unfortunately, it is unlikely that an income tax return will be able to sufficiently fund your debt negotiation program, but it may help to shorten the overall timeline.

5. Liquidate Assets – Normally a last resort for most consumers, but if your situation is dire and other funding options are not readily available, selling personal items to come up with the monies necessary for debt settlement may be your only option.

6. Increase Your Income – Easier said that done, but perhaps taking a second job or putting in overtime at work is the answer to finding the funds necessary for lump sum debt negotiation.

7. Withdrawing from an IRA or 401(K) – Perhaps the worst option on this list, withdrawing from a tax-deferred account rarely makes sense for consumers given the potentially high opportunity costs, as well as the penalties associated with an early withdrawal.