Often, in the event of missed payments, the relationship between debtor and creditor is depicted as one of contention and opposition. It may very well be that a creditor is unflinching in its demands to be compensated for previously loaned funds and may doggedly pursue those who have not held up their end of the bargain.
However, some lenders may be willing to compromise regarding the arrangements they have previously made with loan recipients. Especially if the debtor’s circumstances have unexpectedly shifted for the worse and warrant clemency, it would generally be considered sound practice for creditors to cut their clients some slack.
Through the mechanism of debt negotiation, also known as debt settlement, debtors and creditors (sometimes with the help of a third party) may reach a new agreement to supplant their previous contracts. Some notes about the use of debt negotiation or debt settlement in managing sums owed to lenders:
As far as debt settlement is concerned, settling will ensue in multiple senses of the word. On the creditor’s part, for one, they may find that they would best be served to “settle” for less than they were promised to be repaid under the initial loan as opposed to filing suit against the debtor or simply doing nothing.
Also likely, however, is the scenario that the push for a debt settlement will come from the debtor as a means of making a deal. On top of this, such a separate arrangement suggests that it will “settle” the case once and for all. A debt settlement is apt to come in the form of a lump sum that frees the debtor from his or her practical ties to the creditor.
The solution of debt negotiation may be an outright end to repayment, but nonetheless, it may provide other means of relief that debtors need to restore their financial self-sufficiency. As noted, debt negotiation often involves direct discussion of debt conditions with the creditor and a smaller overall total to be returned by the debtor.
Specifically, though, debt negotiation may include more than just a reduction of the price tag on the loan. In terms of which terms are negotiated in addition to a lower principal, for one, the debtor’s credit rating may be part of the new agreement.
These strategies assume that consumers have a more immediate rapport with their creditors. A number of independent debt negotiation and debt settlement organizations, though, will offer to act on the debtors’ behalf and get their loan payments greatly reduced, convincing the debtors to leave the hard work to them (the agencies). Down the road, however, clients may find that creditors were never even contacted by these third parties, who essentially took their money and ran.
Before getting involved with any company that boasts such results—which is almost universally discouraged—it would behoove one to check the Better Business Bureau and like-minded groups for records of its performance along ethical lines.