If you don’t have money to pay off your debts, you can try debt negotiation with your creditors. Debt negotiation helps in lowering your debt so that you can pay off your debts and become debt free. It is a financial solution that satisfies both the debtor and the creditor. The creditor receives his money (at least a part of it and something is better than nothing), and you as a debtor become debt free.

What is debt negotiation?

Debt negotiation also known as debt settlement lowers the outstanding debt amount, thereby making it easier for you to pay of the debts. When there’s no other way round, you can do debt negotiation with your creditor. Debt settlement generally lowers the outstanding debt amount by 40-60%. However, you need to miss your payments before negotiating or rather settling your debts. Thus, it hurts your credit.

You can generally go for debt negotiation when you have lost your job and have been unable to make payments for at least three months. You can try to negotiate debt settlement rather than filing bankruptcy to get rid of debt.

Which debts are negotiable?

Debt settlement is applicable on debts like:

  • Unsecured credit card bills.
  • Store cards.
  • Payday loans.
  • Personal loans.
  • Medical bills.
  • Bounced checks.

How debt negotiation works?

You can do debt negotiation all by yourself. In Do it yourself debt settlement you are required to negotiate with your creditors to lower the debt amount. You should talk to your creditors about the financial hardship that you are going through and request them to lower the debt amount. If the creditors agree to lower the debt amount, get a written settlement agreement. Now, you will have to pay off the settled debt amount. Once the debt gets paid, your account is supposed to be reported as “Paid as settled”.

However, if you fail to negotiate settlements on your own, you can take the help of a debt settlement company. The company helps you in analyzing your financial situation and helps in preparing a budget. The company will then create a trust account and instead of paying your creditors, you will have to deposit money each month into this trust account. The negotiation company will then settle your debts with the creditors. If creditors accept the settlement offer, the company will request them to send you an offer letter. After this you will make a lumpsum payment to your creditors using the money from the trust account.

Filed under: Debt Consolidation Refinancing

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