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Debt Negotiation Pros & Cons: Is It Worth It for You?

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Is debt negotiation worth it? If you are currently trying to work off crushing debt, the whole ordeal can seem like a very overwhelming task. Fear not, however, for one of the great truths in business is that everything is negotiable. Even in situations where the price or terms of the matter may seem immovable, it can be really easy to secure a discount if you know exactly whom to speak to and what to ask for.

What Is Debt Negotiation & Settlement?

Before deciding whether debt negotiation is the right option for you, it is important to understand what exactly the process entails. Debt negotiation usually occurs between a borrower and a creditor. It is a process which aims to develop a mutually agreed upon settlement on a debt that is currently held by a borrower. Debt negotiation is a strategy commonly used by borrowers who find themselves unable to repay their debts. By means of debt negotiation, the borrower can avoid bankruptcy and the serious financial consequences that come with it.

The process of debt settlement usually begins with the borrower, or a debt negotiator company working on behalf of the borrower. The borrower, or company offering debt negotiation services, drafts a proposal to the creditor detailing how the debt shall be dealt with. Once the creditor receives and considers the proposal, they can either choose to accept, reject or negotiate further.

Due to the fact that all participating parties are required to agree on the same terms, debt negotiation can be quite a lengthy process. Though there is a possibility for varying outcomes, if done right, the borrower and creditor can come to an agreement that a debt will be reduced or eliminated, or create a new arrangement to repay the sum.

Why Debt Negotiation Could Be Right for You

Being in too much debt to handle is never anyone’s dream. However, if you’re ever in a situation where you’re finding it hard to stay on top of your credit card repayments, loan repayments or other financial obligations, the process of debt negotiation can yield some lasting benefits. Some of these include:

Get a Break From Debt & Make Repayments Faster

Debt settlement alleviates a lot of the stress that comes with being in this unfortunate predicament. Debt settlement means that you end up paying less on the amount owed and, if done right, can resolve your financial problems quicker than alternate routes. Roughly speaking, a legitimate debt settlement program could allow you to pay off your debt stress free.. If you opt for other options like debt consolidation, bankruptcy or counselling repayment programs, you may find the process seemingly never-ending and draining in the long run, unlike with debt relief.

Avoid Bankruptcy

When you find yourself unable to repay your debt, claiming bankruptcy is a route that many settle for. However, this can have several repercussions as a bankruptcy filing remains on your credit report for 7 years. There is a chance it can follow you even longer since credit cards, loans and even some job applications do background checks to see if you have ever filed bankruptcy. This can have a decidedly negative impact on your day-to-day life and can be entirely avoided if you opt for debt negotiation services instead.

Avoid Debt Being Charged Off or Sent to Collections

With debt settlement, you can avoid your debt being sent to collections or being charged off, which is when it has been sold to a debt collection agency. While debt negotiation isn’t a miracle pill for all your financial problems, it will help stop all those pesky calls from debt collectors once an agreement has been reached. When you are free of constant calls from collectors, you will be able to enjoy some relief and focus on the matter at hand without being harassed regularly.

Avoid Being Sued for Debt

Dealing with debt is already a heavy cross to bear but facing a lawsuit on top of that can really throw you off the rails. If a creditor is displeased with your inability to repay what you owe them, there is nothing stopping them from filing a case against you. If you are able to draft a debt negotiation agreement, you can save yourself from being sued, and carrying out trying and expensive legal proceedings.
While it might seem like the debt settlement process primarily benefits borrowers, you may be surprised to find that creditors can also enjoy some benefits. Settling a debt that may not otherwise be repaid, recouping some of the initial amount borrowed, and organising a plan for future repayment with the borrower are just some of the pros of debt settlement for creditors.

Make Sure You Understand the Risks of Debt Negotiation

When it comes to money matters, risk is a constant factor. With all the benefits that debt negotiation has to offer, it comes with a certain number of drawbacks as well. Some risks involved in debt negotiation include:

Insufficient Funds

The process of debt settlement generally requires you to present a substantial amount of cash up front. This clause is what makes the process attractive to your creditor because, instead of receiving minimum monthly payments for the next few years, they get to enjoy a lump-sum payment immediately. If you are going in for a debt negotiation, you need to consider where the funds are going to come from and how that money could be used elsewhere in your personal finances. Furthermore, you need to ensure that making a large payment at the moment is not going to leave you high and dry a few months down the line. Importantly, your credit report can be protected by Credit Repair Solicitors at the same time.

Ineffective Negotiation With Creditors

If you do not negotiate effectively, there is a chance your creditor may not agree to your terms. In this situation, you may find yourself in a tighter spot than you were before, as you may now need to face additional costs, such as interest, late fees and even legal expenses. To avoid this, it is important to seek the help of an experienced debt negotiator to help you through the whole process.

Risk of Account Closure

Once your settlement is complete, there is a looming risk that your credit card account is completely closed. This could be due to the fact that your creditor has decided to drop you as a client because of your poor track record of paying back what you owe.

Negative Impact on Your Credit Score

Debt settlement can possibly affect your credit score adversely. As a result of this, it can be much harder for you to borrow money at good interest rates or even to get credit at all in the future.

How Much Does Debt Settlement Affect Your Credit Score?

Even though the balance of your debt will be brought down to zero when your account is settled, your credit report will still display that the full amount was not paid. While this can have a negative impact on your score, it is better to settle your debts than to leave them unpaid to help prevent any continued damage to your credit score and getting defaults.
If you suffer a negative impact on your credit score, you can certainly build a more positive credit history moving forward with the assistance of Credit Repair Solicitors. Start by making small changes such as making your future repayments on time and paying off any other existing debts you may have.
For those who have struggled financially, debt negotiation offers a clean slate to start afresh from and can be a positive step towards removing themselves from a cycle of negative credit behaviour. With the stress of unmanageable repayments removed, they can now direct their attention towards nurturing better financial habits.

Put the Best Foot Forward With Your Debt Negotiation

While it is entirely possible to negotiate a debt settlement on your own, it can be a tedious task that requires you to spend a decent amount of time on the phone, communicating with several different departments and filling in paperwork; as interest keeps accruing on the debts. Furthermore, as there is a substantial amount of risk involved, the slightest slip up can cost you very dearly and ruin your creditworthiness. This is why it is always a smart choice to seek the services of a professional debt negotiator. Having an expert assist you through your journey can help improve your chances of achieving the best outcome, regardless of the complexity of your financial situation.

Let Credit Repair Solicitors Help!

If you feel like you’re in way over your head with debt, Credit Repair Solicitors is here to help you find debt relief and fixing your credit report! We have long been assisting our clients with their debt negotiation matters and hardship applications, having successfully negotiated debt and providing relief to many Australians nationwide. Our seasoned lawyers are well equipped to assist you with the best debt negotiation and credit repair services in Australia. Feel free to call us today on 1300 004 912 for a confidential, free and no-obligation discussion, so we can get you started on your journey to less debt!