Debt Negotiation Help

You don't have to negotiate your debts alone. You can get debt-management help if your accounts are in collections or you are in danger of defaulting. In fact, the most effective way to handle your out-of-control debt situation is by using the services of a debt settlement company. These companies specialize in debt negotiation and have established working relationships with lenders.

Debt Negotiation

If you are going through financial hardship, the best course of action is to notify your creditor about your financial situation. Ask for a reduction of interest to lessen your monthly bill or look to settle the debt for an amount lower than what you owe. However, most lenders do not like to enter into negotiations directly with borrowers. A creditor's main objective is to make a profit and it will look to collect on the full amount owed.

Debt Settlement

For a fee, you can use the services of a debt settlement company to negotiate with your creditors on your behalf. There are several benefits to using a debt negotiator. First, many already have working relationships with consumer lenders. Secondly, using a debt settlement company takes the pressure off you in having to deal with creditor when negotiations get tough or lengthy. Lastly, you may be able to reach a more favorable agreement by using a debt settlement service.

Process

There are a number of debt settlement companies. Do your research by going to the Association of Settlement Companies (TASC) website. This association is the industry trade organization. Choose a company that is TASC-accredited. Once you contact a company, you will be asked to provide financial information. The company may run a "soft" credit report from one of the credit rating agencies for information-gathering purposes. You must meet a debt threshold to qualify for a settlement program. Fees may be charged upfront; however, a reputable company only charges you if it can settle your debt. Certain debts cannot be negotiated, such as federal student loans and child support payments. Once you reach a settlement amount, you are required to abide by the payment plan as outlined in the agreement between the debt settlement company and the creditor.

Credit Counseling Vs. Debt Settlement

Credit counseling typically involves helping you to manage your finances. A credit counselor can negotiate an interest rate reduction, which lowers your monthly bill but it won't change your principal balance. In contrast, debt settlement involves a reduction of your loan balance to the lowest amount a creditor is willing to accept. Most debt settlement companies offer interest rate reduction and debt reduction programs.

Credit Effects

You credit report will reflect all actions, including debt settlement, on all credit accounts. A debt settlement will remain on your credit report for seven years which will lower your credit score. In general, settling with your creditors is viewed in a more positively than if the account is charged-off, which also remains on your credit report for seven years.