Debt Relief
Debt Negotiations
Debt negotiations summary:
Debt negotiations could help you clear your debt balances faster.
Successful debt negotiations aren't guaranteed, but some creditors may agree to reduce your interest rate, lower your payment, or accept less than you owe as payment in full.
You are allowed to negotiate debts directly with your creditors. If your situation is complicated, you have multiple debts, or you're uncomfortable with the process, a debt settlement program could offer extra help and expertise.
Debt Negotiations Definition and Meaning
Debt negotiations are the process of talking with creditors to try to persuade them to reduce, eliminate, or redefine the terms of your debt.
Creditors are more likely to help you if you can show that you're experiencing financial hardship and can’t afford to repay your debts under their current terms. Debt negotiations could offer you a path forward.
Types of Debt Negotiations
There are several types of debt negotiations. The right solution for you depends on your credit score, amount of debt, and overall personal financial situation.
Asking for lower interest rate
One of the simplest debt negotiations is to ask your creditor for a lower interest rate. Some creditors will agree to reduce the APR on your credit card or other debts if you ask.
Debt forbearance
If you’re having temporary financial difficulties, you can ask for forbearance. That’s a temporary break from payments. This type of debt negotiation won't reduce your debt. It pauses payments, and in some cases, you’ll need to get fully caught up on the missed payments when your forbearance ends.
Debt repayment plan
Some creditors will agree to reorganize your debt into a new payment plan with lower monthly payments. If you’re having trouble making your monthly debt payments, this type of debt negotiation could help fit your budget.
Debt settlement
Settlement is one of the most powerful types of debt negotiations because it could significantly reduce your debt if your creditor agrees. With debt settlement, you offer less than the full amount you owe and ask the creditor to forgive the rest. Settling debts takes some work. If you want help, debt settlement programs can help you with these debt negotiations.
Key Aspects of Debt Negotiations
Whether you want to do debt negotiations yourself, or work with a debt settlement program, there are a few key aspects to understand:
Talking to your creditors: Debt negotiations are all about talking with creditors. If you're having financial difficulties or falling behind on debt payments, now is a good time to tell your creditors. If you start the conversations early, debt negotiations might go more smoothly.
Gathering information: Whether you’re missing a debt payment for the first time or receiving calls from a collection agency, it’s important to go into debt negotiations with all the details in hand. Gather your statements and any other important records, and make sure you understand how much you owe on the debt and what you can do about it.
Creditors don’t have to settle debts: Not every creditor will agree to negotiate.
Debt settlement programs offer professional help: One good reason to sign up for a debt settlement program is that experienced negotiators will work on your behalf. They might already have relationships with your creditors, as well as proven strategies for successful negotiations.
Debt Negotiations FAQs
Can I use debt negotiations to lower my minimum payment instead of canceling my debt?
Possibly. Through private negotiations or a debt management plan handled by a credit counselor, you may be able to get your interest rate lowered and/or your minimum payment reduced. Keep in mind, though, that minimum payments are probably already low compared to the total amount you owe. And decreasing credit card minimum payments further could extend the debt repayment for decades. If you are having trouble meeting your minimum payments, lowering them may only give you a limited amount of relief.
What happens if a creditor insists that I be involved in negotiations?
In some instances, we may ask that you participate in negotiations with one or more of your creditors. This participation may involve you joining one of our negotiators or representatives in communications with a creditor or, possibly, you communicating with a creditor directly. You are not required to participate in such negotiations. If you choose not to participate, we will discuss with you alternative strategies for settling that debt. You may request that we continue attempts to negotiate a settlement of the debt without your participation. You may also withdraw that debt from your program at any time before it is settled with no charge or penalty to you. If you withdraw a debt, we will continue our efforts to settle any remaining debts in your program.
If we do ask for your participation in negotiations with your creditors, and you agree to participate, we will advise you throughout the process, and we will charge our settlement fee, as described in your Debt Resolution Agreement.
Do you guarantee you will settle all of my debts for a certain percentage?
No. Every case is a negotiation, and there is no guarantee as to how those negotiations will go. Furthermore, the success of our negotiations is highly dependent on your ability to save a specified amount each month you are in the program.
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