There are options where a debtor and a creditor can explore different possibilities as to how a debt will be settled. This type of action most of the times leads to a debtor paying less than what they actually owe. If you are struggling with multiple unsecured debts such as amounts that you spent on your credit cards that remain unpaid then debt negotiation is a good option for you to pursue.
Negotiating debt seems like a scary activity but it does not have to be that way. It involves engaging someone to act on your behalf in order to fulfill your debt obligations in a more manageable and favorable way. You may also take it on your own hands and contact your creditors personally. There are non profits making credit counseling organizations that advise debtors on how they should negotiate with their creditors. However, the Federal Trade Commission (FTC) has indicated that debt consultants and firms usually charge their clients hefty fees.
It is important to enter in to debt negotiation while you are prepared. It is advisable to attend credit counseling clinics which are available for free. This will enable you to evaluate the status of your finances and establish how much financial hardship you are confronted with. In addition you will be a position to know how much help you require.
Debt negotiation basically involves negotiating for a monthly payment that is favorable to you. In case you hire a consultant your debts are consolidated where a comprehensive monthly payment in favor of all your debts is negotiated. The net effect is usually favorable to the debtor in terms of interest rates and payment terms. If the negotiation is being done on your behalf then you should inform your creditors to deal with your debt consultant directly. However, creditors are not obliged to do so and may continue dealing with you directly.
The process of negotiating debts is not always easy. It requires patience as some creditors may not be willing to approve any debt settlement plan. To impress them you can provide documentations such as current paychecks so as to demonstrate your status in terms on employment which translates to the ability to honor monthly debt payments.
If you reach an agreement or your debt consultant successfully negotiates on your behalf and obtain a settlement plan, then you should make sure to honor every monthly payment to avoid more trouble. It is advisable for people with multiple debts to engage a consultant who are usually more experienced and able to secure better terms. On the other hand, creditors will usually agree to debt negotiation approaches as they also realize it may be the best option for them to recoup their credit exposures.