Debt negotiation is the process that involves having your debt “negotiated down” by the lender, through either partial or complete payment of the debt. It is also possible to extend it to situations where the debt outstanding (all accounts) is settled, but it is only possible after an account is successfully negotiated down.
If a settlement that has been negotiated been reached, you would be required to pay back a percentage of what is owed, usually less than the balance originally. It is contingent on the type of debt as well as your financial situation it could be possible to have no payment or repayments at all until the account has been paid in full.
What is the procedure of debt negotiation?
In the case of consumer debt lenders have an individual procedure to negotiate down the amount of their account(s). You would normally contact the lender via phone to discuss your financial situation. They may ask you for documents that prove your position as a client who is not able to pay the loan in the full amount.
Once the lender is aware of the specifics of your situation, they may be willing to negotiate with you a repayment plan that is less than the total amount owed. Remember that you’ll still have to make some payments towards the debt until it’s fully repaid, even if a negotiated settlement can be reached.
In certain situations, a debt negotiator may be required to call your creditors directly on behalf of you. If you’re not able to speak to customer service representatives by telephone in this case, it would be required.
When your debt has been decreased to a certain percentage of the original balance due, you will have typically 36 or 48 months to repay. There is a possibility to pay off all debts in shorter periods of time according to the circumstances.
What kinds of debts can you be negotiated?
The majority of consumer debts can be discussed with a lender or creditor. The majority of types of debt that can be repaid in time, such as personal loans, student loans and lines credit, can be negotiated by the appropriate person at the lender’s office.
The other issue is business debts. If you’re having a loan from a business or a the owner of a business to whom you are sub-contracting for services, the chances of negotiating that debt extremely slim.
It is crucial to remember that some lenders may not agree to the repayment schedule for your debt, particularly in the event that you’ve defaulted on a few payments or if the account is being held in collections.
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What are the advantages of debt negotiation?
There are several benefits of debt negotiation. Based on the lender, you might be able to have your entire debt amount cancelled or only a portion of the total debt owed paid. This might bring some cash flow relief for you until the repayment plan is in place.
Debt negotiation can also permit an extended period of time during which no monthly payment is required. This is beneficial if you are unable to make larger monthly payments and you require more time to get your finances in order.
In certain situations you may find that debt negotiation is the only option if you are in the process of filing for bankruptcy or wage garnishment.
It is important to note that negotiating debts can negatively affect your credit score over the short term is important as it will be considered being a default. The lender that you choose to use the debt might be sold to collection agencies or referred for legal action when you’re unable to pay your debts after an agreement has been made.