How Debt Negotiation Companies Can help Debtors

Debt negotiation is a broad term for the many different techniques used to negotiate with current lenders to reduce the burden of loans. If you are in over your head with debt and cannot independently escape the burden of paying, then it may be time to speak with a debt negotiation company. Not all debt negotiation companies are equal, and some will treat you with more respect and care than others. Working with the right debt negotiation can allow you to move forward positively and avoid bankruptcy.

Debt Settlement

Debt settlement is one option for people who are able to come up with the funds to pay off at least a significant portion of their debts. These borrowers may consider selling an asset, taking a personal loan from a family member or making use of their savings to get out of debt. It is also possible for these borrowers to get another personal loan that provides them with immediate cash to pay off lenders. 

The debt negotiation firm can then approach lenders and work to arrange one, lump-sum payment for the existing debt. This payment will be lower than the total amount owed. However, the lender may be willing to accept the payment because it is a guarantee of funds very quickly. This is also an option for individuals who have received a large inheritance, bonus or raise and would like to pay off debt now instead of carrying the cost of financing.

Debt Refinancing

Refinancing is essentially paying off one loan with a new loan at a lower interest rate. This new loan typically comes from another lender. It is not possible to take out a second loan with your current lender because your lender will not want you to refinance. Refinancing is an option for those persons who took their loan at a high interest rate. When the national prime rate drops or your credit score increases, you may now be eligible for a lower rate.

Refinancing involves a level of debt settlement. The new lender will offer to settle the existing loan in exchange for a prepayment fee. Even with this prepayment fee, you will often save money if the new interest rate is low enough. You will have to do the math to find out which option will save you money over time.

Debt Consolidation

Consolidating debts usually involved both settling and refinancing your loans. When you have multiple loans, a debt negotiation company can start negotiating with your lenders to pay off the loans at once. They will attempt to get you the best deal on your settlement. Then, you will have one new loan with them instead of paying off many loans each month.

You should only consolidate your debt if you can get a lower interest rate with the new loans. It is likely that you will have many different rates on your existing loans. Only move those loans into consolidation that will end up with a lower interest rate than what you are currently paying. Remember: you do not have to consolidate all loans on your docket in order to enter debt consolidation programs.


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