Debt Negotiation Programs
When considering debt negotiation programs, a person has one other option besides this one: debt consolidation. The borrower needs to consider certain factors when deciding which action to take. With a consolidation program, the borrower will have prearranged repayment plans with the credit companies such as credit card firms. This repayment will be lower than the payments required for the normal credit options. The borrower will most likely also have lower interest rates that were bargained by the consolidation company, and the debtor will only have to make one payment per month to the consolidation company. As soon as the debtor signs up with a consolidation organization, creditors can no longer hassle that person. But at the same time, the debtor must cancel all his credit cards that are included in the plan. The consolidation company also charges certain administration fees, which may range from a flat fee to a fee for each creditor. This last fee may be charged each month that the borrower uses the consolidation firm's services. With a debt negotiation company, on the other hand, the borrower will have different advantages and disadvantages.
The second of the debt negotiation programs is sometimes called debt settlement. This program is for people who cannot handle the plans offered by a consolidation company or for someone who has not paid any of his payment for three months or longer. Right away, when using this program, the debtor stops making payments to his creditors and agrees to comply with the agreements bartered by the debt negotiation company. Once again, the creditors must stop hassling the borrower. The organization will take monthly payments and put the money in an account for the purpose of repayment. Sometimes, the company will allow the debtor to establish this account himself. In the meantime, the company goes to the creditors and begins negotiating terms for repayment. Many times, this agreement will mean that only 40 to 50 percent of the money owed will have to be repaid. Once the agreement is made, the debt negotiation company makes a payment to settle the debts, and then the borrower must deal with the negotiating company rather than his creditors. One disadvantage of this program is that the person's credit score plummets, making it more difficult to get good credit in the future.
When looking for debt negotiation programs, try to find program that helps the creditor repair his bad credit history at the same time. This can include making the creditors agree to write in the credit report that the money was paid in full rather than that it was paid at a certain reduced rate. This will remove some of the negative effects on the credit report. Some companies also include a credit repair program with the services they offer. For some people who owe a great deal of money, a lawyer who specializes in this area of finance may be a good answer. These lawyers are skilled in the process of negotiations and are familiar with the language used in financial dealings. They can sometimes broker a better deal than a company without this professional expertise. But these lawyers can be very expensive, so the person who has less debt may find the fees they charge to be prohibitive. One caution is to thoroughly check out the organizations that claim to provide this service. Some of these firms are owned by the credit card companies themselves, and therefore may not have the debtor's benefit in mind. Many of these firms can be found on the Internet, so the first step in finding debt negotiation programs is to begin making phone calls and filling out the necessary paperwork to check out each organization.
A debt negotiation company will give its clients certain financial advice to help them stay out of debt once they are being freed of the money they owe. One is to never cosign a loan. Many people get into financial problems because someone they trusted to repay a cosigned loan forfeits and the credit companies come after them. Also, have some type of process for eliminating impulse or unnecessary expenditures. For some people, that means going home and thinking about the purchase for a week before making the purchase. Learn the difference between needs and wants. Credit cards will always be a temptation to spend, so when you go shopping, leave them at home. Also, make rules about how and when to use these cards before using them. Sometimes, a credit card can be a life saver, but most of the time, it can just lead to more problems. Another step is to consider what the purchase might do for a person's credit rating before making a purchase. What would happen if the loan cannot be repaid?
The way a person builds up his credit report will make a big difference on the health of his financial future. The Bible also has a principle that we can use for our lives: "Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law" (Romans 13:8). When we love others, we change our focus from "having" to "caring." When deciding on debt negotiation programs, make sure to check out each company's claims carefully. Some offer incredible advantages that can never be reached in real life. A debt negotiation company can be a great asset, or it can be a problem that makes it even more difficult for the borrower to get out and stay out of financial problems.
Debt Negotiation SolutionUsing a debt negotiation solution can help a person deep in debt rebuild his credit rating and begin anew by planning for financial health. But the important step in this process is to research the companies that offer these programs to see if their claims are reasonable and if the company will follow through with what they say. Some firms claim to be nonprofit, but that is no guarantee that what they do for their clients will benefit them. No matter what the company offers, negotiating with creditors is difficult and cannot be assured that the debt will be limited by 40 to 50 percent. As many people find out, going over the credit limit, not paying bills each month, and making late payments can cause credit card debt to triple or double through added fees and larger interest payments. At the same time, the organization that will help negotiate with credit card companies will also charge fees. So the person who hires them can find themselves in a more difficult position than before if the company cannot do what it claims to do in reducing the debt. Many will charge a fee related to the percentage on the money supposedly saved by using the firm.
A debt negotiation solution can have benefits too. When using a good company who is negotiating with creditors with skill, the debtor can find himself in a repayment plan that includes repaying just a percentage of the original amount owed. The organization will set up an account into which the debtor pays and which the organization uses to repay the loan companies. The debtor then never has to deal with the creditors, who have to stop hassling him as soon as he signs up with the intermediary. But the debtor has to be aware of fraudulent claims from the companies. One tip-off is when a company claims tobe able to remove unsecured loans because the deals have to be made with the loan companies, and depending on how the negotiations progress, the terms will be determined. Also, if the company claims that it can help the debtor avoid bankruptcy, be wary of that firm. No one can keep another person out of bankruptcy if the loans have defaulted to a certain extent. Another important feature to examine is the fees charged or if the company wants a percentage of the debtor's savings. If the firm also claims that by using its services, the client will not have any negative impact on a credit report or that the firm can remove negative information from a credit report, be wary of these services. Some companies will ask the client to pay monthly payments to them rather than to the creditors, and that can be a problem for the debtor. A person seeking relief from loans needs to be wise in all dealings, even with organizations that claim to be nonprofit.
The Federal Trade Commission (FTC) regulates firms who deal in debt negotiation solution and has filed complaints against certain companies that have taken millions of dollars from people who are seeking relief from negotiating with creditors. Some of these fraudulent firms fail to disclose that when the client signs up for their services, it may take six months before they contact the creditors, therefore the creditors still keep hassling the client during this six month period. In the mean time, late fees still accrue and the creditors can still sue the client for the outstanding debts. Thinking that the organization they hired is working on a debt negotiation solution, the clients don't make monthly payments during this time, which means that the interest rates rise and even more negative statements are recorded in their credit reports. Because the debtor has authorized the creditors to examine his creditor report when applying for a credit card or other loan, the creditor knows what kinds of assets the borrower has and how likely that person will be to file bankruptcy. Therefore, the creditors may get even more aggressive when the debtor doesn't contact them during this period. It is essential that the debtor makes sure that the company representing him is actively pursuing the case and is on top of the problems the debtor has with his creditors
When coming to terms, the creditors may insist on a payment plan that is high, such as 75 cents on the dollar. The debtor then comes back insisting that this is too much to pay back in his financial distress. The debtor then must show financial hardship including income and assets. When the creditors see the lack on ability to pay, they will come back with better terms. This is how negotiating with creditors happens. A good settlement of accounts would be in the 30 to 50 percent range. It is very rare to find a settlement in the 10 percent range. One factor on the terms offered by the creditors is the internal policies of these companies. That will not depend on the amount of the loans, but on what the loan company's policy at that time. A good intermediary will be familiar with the policies of these creditors and will know how far the debt negotiation solution can go. Different plans may be made with different loans. In some cases, a short payment plan will pay off larger amounts of credit card loans. It may take from three for six months to complete these payments plans. A special management plan may stretch out the repayment for one to four years.
The Bible talks about how we should handle our money. Jesus says, "Who then is that faithful and wise steward, whom his lord shall make ruler over his household, to give them their portion of meat in due season?" (Luke 12:42). He expects us to be wise stewards of our money. Taking care of our delinquent accounts is the first step toward being a good steward.