subject: Debt Reduction Programs – What Exactly Is A Deb Reduction Program? [print this page] Debt Reduction Programs What Exactly Is A Deb Reduction Program?
These, simply put, are companies that specialize in acting on your behalf to help lower your debt or at the very least improve the terms of your debt. This could mean that they negotiate terms for reduction such as for every dollar of debt the lender will accept $0.60 as payment in full. They could also improve the terms of your debt by maintaining the same balance due but changing your payment schedule to be more fitting to your income for example if you are frequently late on your car payments because they are due at the beginning of the month when your rent and/or mortgage are due they can possibly negotiate with the lender to move your due date back to later in the month. Now, you could more than likely negotiate with the lender yourself to change your due date but something they may be able to do that you may not be able to do is have the lender move the defaulted debt to the end of the payment term so if you have defaulted on 3 payments the lender forgives this and adds 3 payments to the end of the term; you can imagine how helpful this could be.
Debt reduction programs can also serve to benefit you and your pocketbook by debt consolidation. We will discuss this term more later, but essentially debt consolidation is taking the debts for which you are behind and/or defaulting on and bringing them under one umbrella so that you have only one payment that has more than likely been renegotiated as if you were starting a brand new load. Many times the debt reduction program that you sign up with will be through a debt consolidator as they will attempt to buy your debt from your lenders at a negotiated rate then they will become your lender and they will make their money from the interest on that loan. This is generally how these companies make money, but you need to be careful that the program you choose doesn't jump immediately to consolidation as this may or may not have a negative impact on your credit score.
If you are only having trouble with a single loan then I would find a debt reduction program that charges a fee for their services rather than one that serves as a consolidator. You may also be able to negotiate this yourself as the lender would rather recover a portion of the loan rather than none at all as initiating the collections process essentially means they'll only be making pennies on the dollar anyways. There are many sources of information on how you can do this including e-books (offered here), regular books (also offered here), and blogs (of course offered here as well) on how you may approach negotiating with your lenders. My biggest advice I can offer you is that you catch more flies with honey than with vinegar. You will be much more likely to get the lender to agree to your terms or a compromise if you remain level headed and have your affairs in order before you talk to them. Did you have a long period of on-time payments? Remind them if you did. Have you been a loyal customer for an extended period of time? Let them know. Will you be a customer again once this debt is paid? Let them know you will as long as they treat you fairly. Approach them as if you want to give them their money but you truly just aren't able to and you want to work with them so that you are able to fulfill your financial obligations.
