The Debt Relief Industry – How Does The Debt Negotiation Process Work?

The debt relief industry can be very confusing for people coming into it

. This is usually made worse because the people who are trying to find out information about the industry are normally struggling with debt themselves and so are potentially vulnerable.

There are basically two types of program that are available in the debt relief industry. They are debt consolidation and debt negotiation. The names change from one organization to another, so it's important to understand what these two different systems do.

Debt consolidation is when debts are consolidated into one monthly payment. Generally when people enter into one of these programs they will be able to get reduced interest payments, as well as other factors such waived late fees.

This method should allow individuals to pay off their debts much more quickly. However, they will generally require people to make 3 consecutive payments in full before any reductions become available. Therefore, not everyone is in a position to be able to afford this type of service.

The other program is debt negotiation. Here an individual or company works with a debt relief company who negotiates on their behalf with their creditors. By making their creditors understand that they are in a difficult situation and may have to declare bankruptcy they are able to get reductions.

Creditors make a business decision to reduce debt because when a company, or individual is forced to declare bankruptcy, the creditors will end up getting back nothing.

The first option has less effect on a persons credit rating, in debt negotiation individuals effectively no longer pay their creditors and put money into a holding account until the negotiation process is completed. This can take some time.

However, once the negotiation is completed and the debt starts to get repaid the credit score will start to improve. This method can allow people to get out of their debts very quickly.

The Debt Relief Industry How Does The Debt Negotiation Process Work?

By: smith archer

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