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Debt negotiation always begins with a need; the need is for relief from creditors who are hassling you, calling all the time demanding money that you do not have. You may have recently suffered an injury and missed some work, had your hours cut, or even lost your job or just let your finances get away from you. Whatever the reason, you are struggling with sleepless nights, worried every time the phone rings, and getting threatening letters in the mail in those mean-looking pink envelopes. Debt negotiation is one way of satisfying that need for relief.
What is Debt Negotiation?
Debt negotiation is an agreement reached with your various creditors where they agree to settle your loan for less than you owe on it. This might mean that they lower your interest rate, eliminate late fees, or actually negotiate down the balance due. Debt negotiations have been regularly done to the tune of .50 cents on the dollar of debt that is actually owed or sometimes less. This means that if you can follow through with the negotiation, you can manage your debt much more easily and get out of trouble faster, than trying to go it alone.
Debt negotiation is best handled by professional negotiators and credit management companies because they have existing relationships with most creditors in the country and the lenders know that when they come a’callin, that the situation is serious with their borrower. Lenders are naturally reluctant to negotiate debt, seeing how it is actually a giving up of money that is due them, but they will make negotiations if they believe it is necessary to recover any amount from the borrower as opposed to forcing the borrower into bankruptcy and receiving nothing at all.
Who is a Candidate for Debt Negotiation?
Candidates for debt negotiation include those who feel at the edge of their rope and who have allowed their debt situation to go on long enough to damage their credit so that they couldn’t get a (preferable) consolidation loan. This is because debt negotiations will damage your credit score as your lenders report the action to the credit reporting agencies – letting any potential future lenders know that you failed to live up to your original obligations with them. This damaging info can stay on your credit report for up to ten years. You should speak with a debt management specialist before deciding to proceed with a debt negotiation. There may be alternatives (such as a home equity loan or home equity line of credit that you may qualify for, that can actually improve your credit while getting you out of debt.
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