There is no disputing that the number of individuals struggling to make debt payments is growing, and so too is debt negotiation in Australia. You may think ‘hatred’ is a strong word, yet that is exactly how many people feel about debt. Debt can rob you of your happiness and keep you locked in the past. When your bills and credit card interest payments build up, it’s difficult to envision the future, let alone figure out how you’ll ever make your monthly payments on time. It’s why many individuals turn to debt negotiation services to assist them get out of debt and make the first steps to a positive financial future. 

If paying off your debts seems overwhelming and debt consolidation isn’t working, there are additional choices available. Debt negotiation or debt settlement is a tactic that may assist you in avoiding bankruptcy. It is often intended for persons who are suffering substantial financial troubles. Keep reading this guide to learn more about debt negotiation, how it works and how it might help you. 

What Is Debt Settlement? 

Debt negotiation or debt settlement is a procedure that occurs between a borrower and a creditor where they try to reach a mutually agreed settlement on a borrower’s existing debt. It is typically employed by debtors who are unable to repay their debts to avoid bankruptcy and the harsh financial implications that come with it. 

Although the result may vary depending on the circumstances, the borrower and creditor may accept that a debt will be lowered or cancelled, or that a new repayment plan will be implemented. The amount a creditor will settle for is determined by several criteria, including your total balance and financial circumstances, but it usually varies between 30% and 60% of your outstanding sum. 

For instance, if you owe $10,000 on a given credit card, you might well be able to make a settlement with your credit card provider to pay only $6,000, or 60%, of your current amount. The credit card issuer will waive the outstanding $4,000 in return for your one-time payment of $6,000. A professional service provider will save you thousands whilst protecting your credit score. 

Debt negotiation companies can play a huge role in helping you out here. Debt settlement firms are often known as ‘debt relief’ or ‘debt adjustment’ firms. In general, these firms offer to approach your creditors on your behalf to negotiate a better payment arrangement or settlement to lower your debt. They usually charge a fee, which is usually a percentage of the money you’d save on the negotiated debt. 

What Are the Benefits of Debt Negotiation in Australia?

Debt negotiation may be an appropriate alternative if you are having difficulties making your monthly instalments, are facing severe financial hardship, or are striving to avoid bankruptcy. However, because the procedure is entirely reliant on the creditor’s discretion, a favourable result is not always guaranteed. The plan should preferably be used in conjunction with financial counselling and other money management techniques to assist you to prevent similar situations in the future. 

However, with that said, debt negotiation can help you to manage overwhelming debt, pay off debt sooner, and avoid negative repercussions like debt collection, bankruptcy and more. Any of these benefits can significantly reduce your financial stress, helping you think more clearly and make smarter financial decisions in the future. Therefore, it’s up to you to decide if the benefits outweigh the risks in your unique situation.

What Kinds Of Debt Negotiation Are There? 

Because everyone’s circumstances are different, there is no one-size-fits-all debt negotiation approach. The options available will vary depending on the type of debt, the lender and the lender’s own regulations. 

Some common debt negotiating tactics are as follows: 

• Requesting for a financial hardship extension, in which the due date of a reimbursement is momentarily extended. 
• Requesting that any interest paid on your debt be waived. 
• Making a one-off larger payment to demonstrate that you plan to settle your obligation as soon as possible. 
• Requesting that your debt be forgiven if you are unable to repay it in the coming days. 
• Requesting to put repayments on hold for an agreed-upon amount of time.

Make Sure You Know the Risks Of Debt Negotiation 

If you’re thinking about debt negotiation, keep in mind that there may be some negatives to the process. 

Some of the dangers associated with debt negotiation include: 

High Service Charges

Many debts negotiation services or debt negotiators impose exorbitant fees, ranging from $500 to $3,000 or more. These costs are not applied to your debt; instead, they are paid directly to the agency. When fees and future taxes are added to your final payment, a large portion of the savings from the settlement amount may be lost. 

Your Creditors May Refuse to Negotiate

There is no guarantee that your lender will accept to negotiate. Even with the best debt negotiation company in Australia, some creditors will refuse to budge. As a result, you may lose money, time, and effort on this approach.

It Can Negatively Impact Your Credit Score

Wondering how much debt settlement affects your credit score? It depends on how the debt settlement is managed, but that failure to pay the full original amount will still appear on your credit report for at least the next 7 years. As a result, you mind that your borrowing power is severely diminished, and you must work much harder to bring your credit score back up. However, this can certainly be a preferable situation to being overdue on payments, filing for bankruptcy or finding yourself faced with debt collectors, all of which also negatively impact your credit report. 

Put Your Best Foot Forward By Getting Debt Negotiation Services: 

A person’s debt may accumulate to the point that they are unable to repay it. There’s usually a legitimate cause: a layoff or wage cut, large medical expenditures, or an unforeseen emergency expense. Whatever the cause, getting out of enormous debt on your own might be challenging. This is especially true if you have credit card debt or other recurring debt that never seems to go away, even though you pay it off regularly. 

Debt negotiation can then be a solution, but it must be treated with caution. A debt negotiator can talk with your lenders and get them to accept a lower payment. They will try to persuade your creditors to approve a lump-sum payment that is less than your initial total, for instance. However, how this is achieved and the additional advice your debt negotiation service may give you varies. 

Some may ask you to put your lump sum into a company-managed savings account, while advising you to pause paying your debtors. This tactic is viewed to increase the likelihood of your settlement being approved. It is a high-risk action, though, that may have severe effects, including being recorded as a failure to pay a debt or make a payment on time on your credit report. 

At the same time, when you’re working with a reliable debt negotiation service, you are getting help from the people who know how to manage these cases the best. They have the experience and skills needed and are also aware of the rules and regulations. This means they can make sure that you are following all the rules necessary to make sure that your negotiation is solved as effectively and as fast as possible. 

Can You Negotiate Your Own Debt Settlement? 

In some cases, negotiating a debt settlement on your own might be a viable option; however, overall, it will affect your credit score more negatively including being a time-consuming option. Most of the time, you’ll have to spend a significant amount of time on the phone, speaking with various departments, and filling out paperwork. However, often people are not aware of the legalities involved and how to go about putting pressure onto the creditor. 

The ideal place to contact a reputable service to represent you and they can contact the creditor as soon as possible. Ignoring overdue letters will not help you, and late penalties will begin to accumulate if you do not act quickly. Many organisations offer their own hardship provisions that you may use if you fulfil a specified set of conditions, enabling you to stop your instalments for an agreed-upon length of time or change your repayment terms to accommodate your present circumstances. 

Of course, when things start to get a bit trickier, having a specialist on your side can help you get the best possible conclusion for your conditions, especially if your financial position is very complicated. It’s crucial to realise that hiring debt negotiation services can be costly — depending who you choose — and the procedure isn’t guaranteed to provide you with a better outcome than negotiating on your own. Hence, therefore Credit Repair Solicitors are recommended as they provide an upfront evaluation at no cost and provide fixed-fee services.

Negotiating Credit Card Debt & More: Make the Right Choice for You

Debt negotiation or settlement can seem simple. You just need to get your creditor to agree with a few changes. Unfortunately, it’s not as simple — or as risk-free — as it seems. Negotiating with your creditor may be time-consuming and difficult, whilst debt negotiation services can be unsafe and costly if you do not choose wisely. Furthermore, debt settlement doesn’t completely remove the debt from your credit score. Nevertheless, based on your financial position, debt settlement may still be the best debt-reduction option for you. 

If you want to learn more about debt negotiation and what it could look like for you, we recommend Credit Repair Solicitors. As experienced legal professionals, they understand the ins and outs of the financial landscape in Australia. They also are committed to helping you get the best results, even offering free, no-obligation consults so you can get a fuller picture of what is possible for your debt settlement. Similarly, they have been a well-trusted and reliable debt negotiation service, helping Australians around the country move beyond their debt. Connect with them today at www.crsolicitors.com.au or by calling 1300 004 912.