Debt negotiation is in which your debt is “negotiated down” by the lender, by either a partial or total repayment of the debt. It could also be extended to situations in which all the outstanding debt (all accounts) are paid off, however this will only happen once an account is successfully negotiated down.
If a settlement has been reached through negotiation, been reached, you’ll be required to pay some portion of the debt owed, generally less than the original balance. It is possible to stop paying any regular payments or repayments until the account is settled. This depends on your financial situation.
What is the process of debt negotiation?
For consumer debt the lender will have specific procedures to negotiate down the amount of their account(s). Most of the time, you’ll need to contact the lender by phone and then negotiate with them after they understand your financial situation. It is possible to request proof in writing that supports your claim that you’re in a position to repay the loan.
After you have explained your circumstances to the lender, they may be willing to collaborate on an arrangement for repayment that is lower than the amount due. Be aware that you’ll have to make some payments towards the debt until it is fully repaid, even if a negotiated settlement can be reached.
Sometimes, a debt negotiation expert could have to reach out to creditors on your behalf. It is only required in cases where you’re not allowed to contact the customer service rep via phone, as in the case of.
After your debt is negotiated down to a percentage of the initial balance due, you will normally have 36 or 48 months to repay. In certain situations it is possible to settle all accounts within less time.
What types of debts could be resolved?
The majority of consumer debts is negotiated by a creditor or a lender. There are many types of debt that are payed over time using the lender’s contact. These include student loans along with credit card debts and personal loans.
Businesses have a different story entirely. If you have a loan with a business owner with whom you are subcontracting services, chances of negotiating the debt extremely slim.
It is important to be aware that some lenders may not be willing to discuss an arrangement for repayment of your debt, especially if you have missed a couple of payments or the account is being held in collections.
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What are the benefits of the process of debt negotiation?
Debt negotiation comes with many benefits. Depending on the lender, you could be able to have your entire debt erased or just a portion of the total due amount repaid. This could be a relief to your cash flow until you’ve finished the repayment plan.
It is possible to bargain for a longer time without having to pay each month’s debt payment. This can be beneficial if can’t make more monthly payments and you require longer time to get your finances in order.
In certain cases you may find that debt negotiation is the only solution when you’re facing bankruptcy or wage severance.
It is important to note that debt negotiation will adversely affect your credit score, at least for a short time, because it is classified as a type of default. Depending on the lender the debt could be sold to collection companies or referred for legal action in the event that you are unable to make the payments once an agreement has been reached.