Debt negotiation is a process in which the lender “negotiated down” your debt through total or partial repayment. It could also be extended to situations where the debt outstanding (all accounts) are paid, though this would only happen after the account is successfully reduced in value.
A settlement that has been negotiated would require you to repay some of the debt, generally lower than the balance. Depending on the type of debt and your financial situation, it may also be possible to not have monthly payment or any repayment in any way until the account is settled in full.
What’s the process for Debt negotiation?
Each lender will have specific procedures to negotiate down consumer debt. The typical procedure is to contact the lender via phone to discuss your financial position. You could be asked for documents in writing to support your assertion that you’re unable to repay the debt.
Once you’ve explained your situation to the lender, they might agree to collaborate on the terms of a repayment plan lower than the amount owed. Even if you settle for an agreement, you’ll have to make repayments towards the debt.
In certain situations, a debt negotiator may have to contact your creditors directly on your behalf. This would only be necessary if you are not allowed to speak with an agent for customer service by phone, for example.
When your debt is reduced to a proportion of the initial balance due you’ll be given 36 to 48 months to repay it. There is a possibility to settle all accounts in shorter amounts of time depending on the particular case.
What kind of debts can be discussed?
Most consumer debts can be dealt with by a lender. Many types of debt which can be repaid in time, such as personal loans, student loans and lines of credit can be negotiated with the correct contact in the lender’s office.
Businesses have a different story entirely. If you’re in a contract with a an owner of a business that you are subcontracting services, chances of negotiating a deal with them are extremely slim.
Be aware that lenders might not offer any repayment plans for your debt if you’ve been late on your payments or you are in collections.
For more information, click debt negotiation
What are the advantages of the process of debt negotiation?
Debt negotiation offers many advantages. Depending on the lender, you could be able to get your entire debt cancelled or only a portion of the total due amount repaid. This can give you some relief in terms of cash flow for you until your repayment plan is completed.
Debt negotiation can also permit an extended period during which no payments on a monthly basis are required. This is a viable alternative if you are unable to pay monthly or you need for more time to organize your finances.
In some cases, debt negotiation may be the only solution if you are in the process of filing for bankruptcy or wage garnishment.
It is crucial to remember that debt negotiation could adversely affect your credit score, at least in the short-term, as it will be considered a form of default. Your lender can sell your debt to collection agencies or refer you for legal action if the deal is not reached.