Debt Negotiation Downsides
While debt negotiation isn't as serious as bankruptcy in terms of the damaging effect it will likely have on your credit, your credit score is still a consideration before you choose to have a professional company negotiate on your behalf. Debt negotiation entails asking (or begging and threatening, if necessary) your lenders for an amendment of the terms of your agreement such as lowering your credit rate, the total amount due on your balance or even taking a lump sum settlement in cash rather than waiting years to be paid off. All three of these options are usually done in a manner that reduces the total amount you have to pay to the creditor to pennies on the dollar. The downside to this debt relief program is that it will negatively impact your credit score when the lenders report that you have failed to meet your credit obligations as agreed in your original contract. In addition, if the credit specialist negotiates a lump sum payment on your behalf (which they would not do without your permission), you will be required to come up with that lump sum payment in a fairly short period of time.
Debt Negotiation Benefits
The primary benefit to debt negotiation is that the more successful that your negotiator is, the less debt you will be required to pay in the long run on your total debt. This can be managed by reducing your interest payment or the actual amount you owe. Compared to a consolidation, this method of debt relief requires much more interaction and support from your debt counselor to accomplish successfully. Some lenders will demand that they deal with the counseling service from then on and you will be required to send your payment(s) through the consolidating company. This is an indication of the built relationship, trust and respect that the debt management company you choose may have with the creditors in your life.