Debt negotiation refers to a process in which the lender “negotiated down” your debt by negotiating a either a full or partial repayment. This is a possibility for all accounts with no outstanding debt. But, this will only occur after the account has been successfully bargained.
A settlement that is negotiated will have you repaying some of the debt, typically less than the initial balance. In the case of a particular debt and the financial condition it could be possible to not have payment or repayments at all until the account has been paid in full.
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What’s the process for debt negotiation?
For consumer debt every lender has a different procedure for negotiating down the amount of their account(s). In general, you will need contact the lender via phone and then negotiate with them once they have a clear understanding of the financial circumstances. You could be asked for proof in writing that supports your claim that you are unable repay the loan.
Once you’ve explained your situation to your lender, they might agree to work together on the terms of a repayment plan less than the debt amount. Remember that you’ll need to pay some amount to the debt until it’s fully paid off regardless of whether a settlement is reached.
Sometimes, a debt negotiator could have to reach out to creditors on behalf of you. If you’re not permitted to talk with customer service representatives over the phone the procedure would be needed.
Once your debt has been reduced to a percentage of the amount due you’ll be given 36 to 48 months to repay it. In certain cases it is possible for you to settle all accounts within the shorter timeframe.
What kind of debts are possible to bargain?
A majority of consumer debt can be settled with the lender. Many types of debt which are paid back over time, such as personal loans, credit card debt, student loans, and lines of credit can be negotiated with the appropriate person at your lender’s office.
A separate issue are business debts. There are a few possibilities of getting an advance from a business or company owner to which you subcontract services.
It is vital to remember that some lenders may not be willing to negotiate an arrangement for repayment of your debt, particularly those who have defaulted on several payments, or if the account is in collections.
For more information, click debt agreement vs bankruptcy
What are the benefits of credit negotiation?
There are several benefits of debt negotiation. Depending on the lender, you might be able to have your entire debt balance forgiven or only have a percentage of the total outstanding balance repaid. This can bring some cash flow relief for you until the repayment plan is in place.
It is possible to agree to a longer time without having to pay each month for debt. This is an excellent option if you’re unable to make monthly payments or want to spend more time trying to organize your financial affairs.
In some instances, debt negotiation may be the only solution when you are facing bankruptcy or wage garnishment.
It is important to note that negotiating debts can adversely affect your credit score over the short term is important as it will be disclosed to creditors as being a default. Your lender can sell your debt to collection agencies or even refer you to legal action in the event that the agreement isn’t reached.