Neglected debts can result in emotional stress, which is detrimental to human relationships and health. Small debts under $2,000 can usually be taken care of with one or two cash advance loans. Most people on a budget today are unable to afford debt consolidation loans. These loans will pay off the debts immediately, but the loan itself is a new debt, resulting in an overall larger debt. Debt settlement is the most efficient way to pay off debts and reduce stress. Since the economy is in a crisis, creditors who have claims on a consumer’s credit report will accept pennies on the dollar instead of the full amount owed. The only difficult part is negotiating the settlement. This article will explain the necessary steps to accomplish this for free.

1. Review Credit Report – Request a credit report and study it closely. Review the items that are potentially negative. Don’t worry about anything that says “discharged” or “charged off.” This means the debt was written off and likely sold to a collection agency. Open collections are the items that need attention. Dispute any reports that may seem erroneous. If amounts are small enough, the creditor will likely not waste the time in responding and the item will simply be deleted.

2. Obtain Some Capital – This will be the most difficult task for most consumers. Try to avoid any loans, even if they are interest-free loans from family members. Instead of borrowing money, earn it creatively. Sell items of value. It is likely that some of these items are a portion of the cause of the debt, so they should be used to help pay it off. Use sites such as eBay or Amazon to get the maximum profit. Put the money in a special account designated for paying off debts.

3. Contact Creditors – When completing this step, focus on settling and paying off one debt at a time. Call the collection company or creditor and offer them a settlement amount. Start low, as they will not settle for the first offer. Never settle for anything more than 2/3 of the total amount owed. If creditors are stubborn, simply tell them an attorney or settlement company will have to become involved on behalf of the debtor. This is usually enough to make them reconsider and offer a reasonable settlement; if not, it may be necessary to contact a settlement company for that specific debt.

4. Ask For Verification – Any settled debts will appear less negative than an open collection. After paying the debt off, ask the creditor to relay the updated settlement information to the credit reporting agencies. This will help credit scores raise slightly. When all debts are paid, the total amount will be 2/3 or less of what was originally owed. The most beneficial part is that no fees will be paid to a mediating settlement company.