
Get exclusive money-saving offers and guides
Straight to your inbox
Updated
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
If you’re experiencing serious financial trouble and struggling to repay debt, you might be at the point where you think that filing for bankruptcy is the only possible solution.
However, debt negotiation is an important strategy that could help you avoid bankruptcy. By negotiating a suitable payment arrangement with your creditors, you may be able to reduce and eliminate debt without suffering the severe financial consequences of being declared bankrupt.
So what does debt negotiation do? Read on.
Debt negotiation allows you to take control of a debt you are struggling to repay. By contacting your credit provider and working together to reach a mutually agreeable arrangement for you to repay an outstanding debt, you can remove the financial pressure and stress associated with owing money.
If the lender is willing to negotiate, you may be able to agree to repay a lump sum amount that is lower than the amount you currently owe. If this is accepted by the lender as full payment of the debt, the debt will then be considered settled.
Debt negotiation is only possible if your credit provider is willing and able to accept a revised payment arrangement. The aim for the borrower is to settle their debt, usually by making a lump sum payment that is less than the total amount owed.
Credit providers are experienced at negotiating payment arrangements with borrowers who are experiencing financial difficulty. However, as this process is most likely new and intimidating to you, it may be wise to enlist the help of an experienced debt negotiator.
Professional debt negotiators are experts at negotiating with creditors on your behalf and can help take the emotion and stress out of the situation. Experienced negotiators will also have good relationships with credit providers and may also be able to help secure a better deal than you would get on your own.
Debt negotiation can be a lengthy process, so don’t expect to reach an agreement with the creditor immediately. Instead, there is usually a significant amount of discussion before coming to an acceptable arrangement.
The aim of debt negotiation is to pay off your debt. With this in mind, the most common arrangement is for the borrower to make a reduced offer to settle the debt by paying a lump sum that is less than the total amount owed.
However, depending on your circumstances, there are a variety of arrangements you may be able to propose to your creditor, such as:
Whether or not the offer is accepted will vary depending on the creditor and on the state of your personal finances.
Debt negotiation has a number of advantages for you and your creditor. For you, debt negotiation:
For creditors, debt negotiation:
Remember: the debt you owe will probably be a profit to your credit provider. The principal amount you initially borrowed in the past is most likely paid off, so any lump sum payment you can make will represent a profit to the lender – which is why they’re willing to negotiate.
Struggling to make repayments and considering debt negotiation? Keep the following tips in mind to ensure that the process runs as smoothly as possible:
Debt negotiation can offer a satisfactory solution for borrowers and creditors, but it’s important to carefully consider all your options before deciding whether it’s the right approach for you.
Picture: Shutterstock
From costs and finance options to what materials you’ll need, learn about bathroom renovations in this comprehensive guide.
Find out what to include in a web developer resume and how a customisable template could help you land your dream job.
Learn more about how PayActiv's Earned Wage Access service can help you access up to $500 of your paycheque for a $5 fee charged fortnightly (only if you access your wage before payday).
Here’s how you can ensure your treadmill is moved safely and at a convenient time.
Our experts crunch the numbers to help you work out the best place to park your money: is it your mortgage or your super fund?
One in four (25%) Australians are worried about how they will pay the rent or mortgage after Christmas, according to new research by Finder, Australia’s most visited comparison site. Find out how the Finder App can help save you money in 2021.
A UCapital unsecured business loan can provide up to $300,000 without security, with repayment terms between 3 and 12 months.
Find out how much a colonoscopy costs in Australia and how you can avoid paying heaps.
Find out how much veneers cost in Australia and how you can avoid being hit with a big bill.
Find out how much dentures cost in Australia and how you can get cover with mid-level health insurance.