Negotiation, of any kind, is a way to reach a solution that can benefit all the parties involved in an agreement. A debt negotiation involves creditors and debtors, reaching out for a debt settlement that may be able to benefit both. Some debts can be very heavy on the pocket and are impossible to pay. In this situation, the debtors then reach out to creditors for a negotiation that can suit both.
Some negotiations might prove to be fruitful while some completely fail. Some creditors may not be ready to negotiate at any cost while some may just support you. Each creditor’s behavior may be different depending on the relationship of the debtor with them and also the amount of money owed. Below are some of the reasons why a creditor may be reluctant to negotiate with a debtor.
It is essential for any debtor or any person, as a matter of fact, to have a sound history in order to negotiate a deal. In case of negotiating a debt, it becomes more important as it might involve an ample amount of money. A debtor with a poor history of paying off the debts or poor relationships with past creditors can find it hard to negotiate a deal with the present creditor.
In most or all cases if two parties sign up a deal, a third party is usually involved as a witness to any negotiation taking place. However at times of negotiating a debt, if the debtor fails to bring the third party on its side, this could raise a challenge. A third party involvement is essential to change the course of negotiation.
The relationship with the negotiator during the term of the contract will play a vital part in the negotiation. A constraint relationship will create problems as both the parties will find it hard to believe each other. A good relationship can help the debtor to reach out to the creditor, in hard times, without any hesitation.
Sometimes a creditor accepts the plea for a reduction in debt or an increase in the time limit to pay off the debt but most of the times, they don’t. This is where a debt negotiation service or debt negotiating company comes into the picture. Debt negotiating companies negotiate with creditors on the debtor’s behalf. They negotiate to reduce the amount you owe them, mostly on credit cards.
Debt negotiating companies or debt negotiating services will offer their help only if it seems that you won’t be able to pay at all. You stop making payments on your debts and instead open a saving account to put a monthly payment there.
Debts charged off by creditors on other lenders stay on credit reports for many years. This can damage a debtor’s credit history and they may find taking loan difficult in future.
Debt negotiating companies are expensive and they don’t work until a proper fee is charged. This is an added expense over an already expense related to debt payment.
Debt negotiating companies will stop you from paying your bills. If this happens, you will be faced with late fees, penalties, and other charges. Creditors can step up their collection efforts against you and charge a higher fee.
In some cases, creditors refuse to negotiate even with a debt negotiating company. In such situation, the risk falls on you and you are left with no choice but to pay off the debt.
Using a debt negotiating company can have a negative effect on your credit score as lenders will be reluctant to give you loans or money. They will be aware of your situation and the reason why you took help from debt negotiating services.
If a particular portion of your debt is forgiven by the lender, it may be accounted as taxable income. It is advised to take guidance from a tax professional about the tax liabilities you will face once your debt is settled.
It is essential in any case, not only this, to record your agreement with a debt negotiating company you choose. If you make a plan and agree on a settlement plan, record your conversation with the debt negotiator. Dealing with debt negotiating companies can be risky. Some debt negotiating services promise more than they can deliver. It is important to research beforehand and choose the one that has a good repute in the market.
