Monday, October 20, 2008

Is Debt Negotiation Bad? - Debt-Relief

Is Debt Negotiation Bad?

Educating yourself about the ins and outs of debt negotiation is a good
first step. Please note that the term 'debt negotiation' is also known as
debt arbitration or debt settlement.

For starters, a lender has little motivation to arbitrate anything less
than the full amount unless the person is two to three months behind in
payment.

To answer your question is debt negotiation bad? You need view it as a
last-resort measure. The truth of the matter is it's one step away from
declaring bankruptcy.

Remember, your lender gave you the money or property in good faith. He or
she has every right to expect that the loan be repaid in full. Morally,
you should do everything that is within your power to pay your debt(s).

However, this is not always possible and despite how much you would like
to repay the loan in full you just can't - not now and not in the
foreseeable future. This is where debt negotiation comes into play. It may
be your only logical course of action.

And, in the case of an old debt that you've long since forgotten about,
debt negotiation would be the best way of dealing with it. There's no
point in keeping a small blemish on report when a little negotiation can
easily turn things around.

But if you find yourself overwhelmed with your current debt load, credit
counselling should instead be your first action step. A credit counsellor
will give you some tools and suggestions for reducing your payments.

Debt consolidation may be more appropriate. A credit counsellor will walk
you through the debt consolidation process. In a nutshell, it means
creating a whole new loan for a longer period of time. This would
hopefully lower your payments enough so you can get back on track.

Please know however, that debt consolidation can be nothing more than a
way of putting off the evitable. It really does little to correct the
problem. That's why many people come back to debt negotiation as a way of
getting out of their financial problems and starting fresh start.

If you're determined to pay of your debt(s) and turn over a new
'financial' leaf you may wish to contact your creditors yourself. By doing
so, you may be able to negotiate a lower interest rate or a more realistic
repayment plan. This is known as self arbitration.

So, is debt negotiation bad if you really need it? The bottom line answer
is no. When your debt is very delinquent, negotiation is often in your
best interest. If this is the case, now is the time to either consider
self arbitration or seek out the help of a debt negotiation company.

Although a debt negotiation program will lower your credit score for as
long a you're in the program, you'll also find that most debt negotiation
companies require the creditor to make sure that the final credit report
reflects the account is now paid in full. Therefore, once your account is
settled you will no longer have a negative report.

A number of debt negotiation companies also include a credit repair
service as part of their debt negotiation program. This repair service
removes any negative items caused by the program. Although it is part of
the program there are additional fees associated with this service.

Is debt negotiation bad? Ultimately, you're the best person to judge
whether debt negotiation is right for you or if it's in your best interest
to consider another alternative such as debt consolidation.

This is where negotiation and your question, "Is debt negotiation bad?"
comes in. Debt negotiation is bad in that it means the complete
destruction of your credit history.

Paul Jesse is a retired government employee and author of numerous home
business and financial articles.
http://www.sheamarketing.com/student-loan-debt-consolidaion

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