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Pursue Debt Negotiation Opportunties

Jessica Lanning

Add this to your list of why cash is king.  Sometimes I can’t even believe the stories that I hear:  $300K second mortgages being negotiated for $30K, $1M in credit card debt being negotiated for 30 cents on the dollar, banks proactively contacting clients with negatively amortizing loans in declining values markets and offering them principal reductions and fixed rate loans for 30 or 40 years at less than 5%.  Do you know what you have to have to take advantage of these deals?  Cash.

The Law of Unintended Consequences in action?!  Sort of….

I have to admit that I didn’t see these kinds of opportunities coming.  Please understand that I have for many years been advising clients not to pay down their mortgages aggressively, to save their money, to keep multiple assets growing in different markets. I have been defining “financially secure” not as a home paid-off, but as having enough money in the bank to weather any financial storm or take advantage of any financial opportunity.

I would not have guessed that perhaps one of the greatest opportunities for that cash would have been to settle mortgage debt for pennies on the dollar, retain the asset, get a fixed rate loan, and continue on the original plan for keeping the property.  Or, for those who took great risk at the peak of the last economic boom and borrowed a truck load of money on credit cards to start a business, to have them be able to start again.

I’m not saying that any of these decisions to negotiate credit are what these investors planned or would have preferred or had an easy time making. Each of them got into their investments with the idea that it would pay off in the traditional way over many years of hard work and/or appreciation.  I’m not saying that their credit won’t be impaired.  What I’m saying is that because they kept cash on-hand, they now can take advantage of the financial “opportunity” that is sitting before them.  I won’t go so far as to call it the catbird seat, but it’s not such a horrible place to be.