Negotiating with creditors may seem like an intimidating experience, but it can actually be quite beneficial. If you are struggling with debt and having a hard time managing your monthly payments, entering credit negotiations can be one way to help lower your payments and get you back on track. However, you may be wondering why debt negotiations could be a better choice than other debt relief options.
Why would a creditor want to negotiate? — Many people assume that a creditor would not want to negotiate a debt and only wants to collect all of their money. In fact, creditors would prefer to negotiate with you directly over some other form of debt relief. A creditor stands to lose much more of their money owed when you settle your debts for less than is owed, or file for bankruptcy. By negotiating the terms and conditions of your debt, your creditor has more control over the process and stands to recoup more of their money.
Do I have to negotiate all of my debts? — Unlike other forms of debt relief, debt negotiation is a process that occurs directly between you and your lender. This means that you can choose to negotiate with certain creditors, and not negotiate with others. Debt negotiation leaves you free to leave some of your debt accounts they way they are and resolve your others through debt negotiation, whereas all of your debts must be included when you file for bankruptcy.
What will happen to my assets?– In general, entering negotiations with a creditor are not that risky, unless your debt is a secured debt. Secured debt creditors maintain the right to repossess the property when you default on payments, but you should be able to keep the property as long as you are making payments through your negotiated deal. Unsecured debts are generally not at risk from creditors in a debt negotiation situation because the creditor would have to secure a legal order to seize any assets for repayment.
Will there be any damage to my credit from negotiating?– Although your credit is likely to be damaged from missed or late payments, entering debt negotiations does not cause further damage to your credit. In fact, you may be able to improve your credit over time once you begin repayments according to your negotiated deal.