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Debt Management: Negotiation or Consolidation? This article will revolve around two debt management strategies. These are known as debt negotiation and debt consolidation. It would be beneficial to learn about these two debt management strategies so you will be able to pick one in case you ever have personal financial management troubles. Debt Negotiation: Bringing Debts to the Bargaining Table Debt negotiation is also known as debt settlement and debt renegotiation. This is simply the act of negotiating with existing creditors for better loan repayment terms. This strategy is aligned with debt reduction strategies because the debt negotiator (the financial consultant), on behalf of the debtor, negotiates with the creditors for reduced balances. The main purpose is to diminish the debts to the extent that the debtor will be able to pay his loans off. Debt negotiation is usually the route taken by individuals who still have a hard time meeting the demands of debt consolidation loans. Simply put, this is a viable debt management alternative in case the debtor can’t afford to pay the minimum monthly payments calculated for his debt consolidation loan. With debt negotiation, the debtor will no longer make direct payments to the creditors. Instead, the company in charge of debt negotiation will put the entire monthly dues in one account that either the company or the debtor has designated. The money in this account is inviolate and will only leave the account if the full target amount has been reached and the debt negotiators can thereby make a lump sum payment to the creditors. However, there’s one thing that one has to take note of about debt negotiation programs. Debt negotiation programs actually hold a debtor’s credit rating down until such time as the payments have been made in full to the creditors and these creditors have reported receipt of full payment. Debt Consolidation: Combining Debts for Ease of Monitoring A debt consolidation program involves combining loans into a single debt consolidation plan that has been arranged by the debt consolidation company for the debtor. When a debtor employs the services of a debt consolidation company, the debtor is presented with lower monthly balances depending on the terms of the debt consolidation plan. The debt consolidation services allow the debtor to save some amount every due date and they are able to consolidate or combine the bills for ease of payment. Since the debtor can now start paying his monthly balances, they no longer receive calls every now and then from collection representatives which can get very frustrating, not to say irritating. However, employing debt consolidation services will also mean paying regular fees to the company that will not count against total debts. One will also have to cancel the credit cards covered by the service. The decision to pick debt negotiation over debt consolidation or vice versa is a decision that I leave you to make. The basics for each type of service have been outlined for information and guidance. You must choose which will be more beneficial to you and which will save you money in the long run.
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