The Main Options of Negotiating a Debt Settlement

The Main Options of Negotiating a Debt Settlement

In a situation where debts burden your business and it feels like there is no way out, the reasonable thing to do would be to consider debt settlement. This would result in the reduction of the interest you pay on the debt you owe the creditor or payment of a lower amount of the outstanding debt. It is a call the creditor will take, and your negotiation will determine the option they go with.

But what would make a creditor forgive part of the debt? Your creditor will only accept to negotiate better repayment terms or lower the amount owed if your business is on the rocks.

How does it work?

The first and most important thing to note is that debt settlement only works for the unsecured loans like credit cards. For the secured ones, the collateral is usually used to settle the outstanding debt. It is an approach many people use when they cannot pay the loans they owe to creditors due to financial difficulties. The requirements vary from one creditor to another, and your negotiation will determine the terms of the privileges if any.  

Debt settlement negotiation options

What are the options available for negotiating  business debt settlement  with your creditor? You could choose to use a  debt settlement lawyer a debt consolidating company or to do it yourself. Remember that your financials will have to undergo scrutiny by the creditors to ascertain that you are unable to pay the debt under the agreed terms.

A debt settlement lawyer

Although it not commonly used, some debtors hire a lawyer to help in the debt settlement negotiations. In such a case, the lawyer's experience in matters debt settlement is a factor to consider beforehand. The rates charged by such lawyers vary – may be hourly, a flat rate, or a percentage of the forgiven debt. Make sure you are at terms with the billing before hiring one.

A debt settlement company

This is certainly themost widely used approach to debt settlement. It includes using a company that specializes in negotiating better terms for their clients (debtors) before their creditors. When using this option, you stop paying your creditor andinstead pay the company. The money is accumulated in an account to an amount that the company can use to ask for a negotiation with the creditor on your behalf.

Experts recommend the use of a debt consolidating company when trying to get a debt settlement. This is because of the experience and reliability of these companies.  

Doing it yourself

Not all debtors want to have their negotiations handled for them, so they prefer doing it themselves. It is actually good to try and reach out to your creditor when you have defaulted on the repayment of your loan. Some banks offer hardship plans for their debtors and can be handy for the repayment of the outstanding loan.

The downside of this option, however, is that you may not have the experience and information that would get you better terms. That is why seeking assistance is preferred.

Conclusion

You want to choose the option that you feel comfortable with, and one that will more likely bring better results. While at it, be sure that you are okay with the billing of the option you go with.