By negotiating the terms of your current debt agreements, you can save money and get out of debt quicker. Provided that you take the necessary precautions to ensure that your credit rating is not damaged in the process, a debt negotiation agreement is always a practical solution to help ease your financial burden.
The Facts
A debt negotiation agreement is a contract between an individual and a creditor in which the creditor agrees to modify the debt. This is often a good option for consumers who, due to their circumstances, find themselves unable to repay their debts.
Types
You may opt for various types of debt negotiation agreements such as a reduction of the total balance of the debt, a reduction of your current interest rate or the elimination of any excess fees you have accrued.
Benefits
A debt negotiation agreement not only benefits you by allowing you to repay your debt faster, it also benefits your creditor. By restructuring the debt to make it more manageable for you, your creditor can reduce the risk of you not paying what you owe and being forced to write off the balance as a tax loss.
Warning
A debt negotiation agreement and subsequent payments is considered account activity. The longer an account remains inactive, the less of an effect it has on your credit score. If your debt is currently held by a collection agency, making payments will result in the derogatory notation updating on your credit file and reducing your credit score.
Considerations
If negotiating with an original creditor, you can request that late payment notations be removed from your credit file. If your negotiations are with a collection agency, however, a debt negotiation agreement is only practical if the company agrees to remove any reports it has made regarding the debt from your credit file.
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