Debt Negotiation
Debt Negotiation is the process of negotiating with a creditor to pay off a percentage of the balance owed or a reduction in the loan or credit card balance. This process, also known as debt settlement or debt arbitration, is not initiated until payments have been missed.
During any negotiations it is possible to discuss terms associated with fees and interest. This process does not require a third party arbitrator and can incorporate negotiating items which include information reported to the major credit reporting agencies. This eliminates any need for debt settlement companies which are considered by many to be predatory.
Most creditors find it is in their best interest to negotiate management debt repayment schedules with debtors experiencing financial hardship. Major lenders do this through their own credit counseling services.
When negotiating with any debt collection agency or current credit holding agency it is important to know your rights as well as the rights of the agency. Knowing these important factors will allow you to negotiate your debt without the assistance of a third party agency, which in most cases practice predatory lending. Below is a list of important tips that will help you.
- In order to know your rights you must research the most recent information for your local and Federal government rules. You have the right to demand that any debt collector stop calling you and you also have the right to demand that any collector prove you owe the money they are asking for, this is called ‘Validation’. The National Association of Consumer Advocates is a resource that will help you learn your rights.
- Prioritize your bills to determine which account must be paid first. Interest rates are a telling factor. The higher the interest rate is for each account determines how quickly you should pay it off. Debt collectors often try to use scare tactics to force a customer to pay specific bills that are not a priority for the customer, but rather a priority for the collector.
- Determine the amount that you owe. After calculating this number you can then go back to the collector and offer less. Once a collector realizes that you are aware of your rights, they will then determine that they may only be capable of receiving less than the entire amount. This will give you more control in the bargaining process.
- Keep all records current. The more information you have at your disposal about your current debt will only make the process easier for you. This includes a current credit report, all statements pertaining to the current debt and any records of correspondence already shared between you and any debt collector.
- Protect all private information. Do not give any collector your place of work, banking information or family information. Keep any conversation you have with a collector close to the facts only, they use manipulation tactics to lull you into a false sense of security which will make you drop your defenses allowing them to use information that was not intended for their benefit.
- Any agreement reached between you and a credit collector should always be in writing. This will protect you from any collection agency who may try to collect from an old account already being attended or may have been closed completely.
- Protect your future credit information. To do this you must ask the the debt collector to remove any negative information they have placed in your report. This is not always granted, instead you may request that your account be listed as paid in full rather than paid in settlement.
- Never send money to a debt collector until you have an agreement in writing. Most debt collection agencies attempt to force the customer into paying off the account quickly in order to avoid fees and penalties. This is another scare tactic used by the collection agencies in order to collect all money owed including the fees and penalties that were illegally added during the collection phase.
