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Debt negotiation is an approach that is used every day to help people deal with serious debt problems. The main principle involves negotiating settlement agreements with your creditors to get them to significantly reduce the size of your debt in exchange for a prompt repayment, usually a lump sum. When your debts are way beyond what you can afford to pay back, the only practical way to deal with them is to use this technique, which can reduce the amount you owe by over half, if done successfully.
The main choice you have to make is whether to try to carry out these negotiations yourself, or use a debt settlement company to help you. The route you choose will very much depend on your situation and how you feel in terms of your experience and knowledge of debt negotiation. If you have already tried to approach creditors about reaching a negotiated settlement, you may have discovered how difficult it can be.
Part of the key to success is to understand how credit card companies in particular operate, as this will inform how you play the negotiating game. Knowing when to wait and when to make offers can have a huge impact on the success of your settlement. There are various guides offering debt negotiation advice, which take you through the whole process. Some even include scripts of what to say, templates for letters to write and details of how to time your actions to achieve the best results.
The alternative to doing it yourself is to use the services of a debt settlement company, who will appoint an experienced debt negotiator to deal with your creditors. When you opt for this kind of debt settlement you are immediately freed from dealing with your creditors and being chased for payment. One of the other benefits that comes with the better companies is that they already have established relationships with hundreds of the most common creditors, which makes successful settlement much more likely.
The process that you will follow with a settlement company is that you immediately stop paying money to your creditors and make payments into a holding account instead. This money builds up each month while your debt advisor works away at reaching agreements with your creditors. As settlements are agreed, the money that is saving up is used to settle the debts. As timing is a key factor in reaching the best reductions on your debts, the negotiation periods can vary considerably, depending on the creditors and other circumstances.
The main advantages of using professional companies like this are that you no longer have to worry about being chased by creditors, you only have one monthly payment to find, and the expertise of the negotiators usually guarantees a good settlement. While the debt settlement company will want to be paid for their services, the best ones will only take a fraction of what they manage to save you as their fee, so you are still much better off than you would have been.
Debt settlement or negotiation is the established approach to serious debt in the US, but for UK residents it is not widespread because of the similar alternative which is an IVA, or individual voluntary arrangement. This involves regular monthly payments for a fixed period, after which outstanding debts are written off.
The process I have outlined does assume you are using a good debt negotiation company, and you need to be aware that the same results are not guaranteed if you happen to select one of the less reputable organisations currently operating. You should take care to choose your company carefully as the worst ones could well leave you worse off by asking for up front fees and not achieving good settlements.
You can protect yourself by using recommendations to find a short list of only well established and reputable debt settlement companies who can show that they have already achieved great results for many other people. As a final safeguard you should always apply to two or more companies in order to make a comparison between what they can offer you.
