Have found yourself drowning in debt? Unable to make credit or loan repayments and bills mounting? If you are struggling to find a way out of debt, you’re not alone. A recent survey shows that over three-quarters of all Australian households are in debt. If you are wanting to find a workable solution to clearing your debt, then debt negotiation may be the answer. But just what is debt negotiation?
What Is Debt Negotiation?
Debt negotiation, as the name suggests is when you attempt to negotiate the terms of your debt with your creditors. There are many potential benefits to doing this such as:
- Stopping further damage to your credit score from missed or late payments.
- Helping you avoid bankruptcy.
- Avoiding debt collectors.
- A possible reduction in the interest rate or payment amounts.
- A possible reduction in the amount owing in exchange for a one-off, lump-sum payment.
- The ability to save while still paying down your debt due to a reduction in interest/payments.
- Improvement of your quality of life, reducing stress and anxiety.
When Should You Negotiate Your Debt?
Given so many of us live with debt, and struggle with it, how do you know when you should seek to negotiate? A missed credit card payment or phone bill here or there isn’t usually going to qualify for debt negotiation. The best indicators that you should seek out debt negotiation are:
- You’re more than 90 days late making a re-payment.
- You have no feasible way to clear the debt in the near future.
- You have a growing number of repayments you cannot make to more than one lender.
90 day behind may not seem long enough to begin negotiating a debt. However, the reality is that the longer you wait, the more damage is done to your credit score.
It can also impact how successfully you are able to negotiate the debt. This is due to you potentially having multiple creditors you are now unable to pay as well as a history of missing payments. Realistically, if you cannot resume making the current repayments with regularity then you should negotiate.
Most creditors will send your debt to a third-party debt recovery service around the five-month mark of delinquency. So you should absolutely engage with them to negotiate before this time – debt collection is best avoided at all costs. So what is debt negotiation? The smart way to avoid further financial distress.
