Negotiate with Lenders to Reduce Debt -- Debt Consolidation versus Debt Negotiation

Debt negotiation is quite different from debt consolidation.

With debt consolidation, you are combining all of your outstanding debts into a single account. Effective debt consolidation lowers the amount of money you pay in interest and saves you money.

Debt negotiation is the process of reducing your overall debt burden or improving repayment terms that better meet your financial situation. You may be able to negotiate with your lenders to reduce your interest rate, the overall debt amount or other factors on loan.

Debt negotiation might product the following benefits:

• Reduce Interest Rate: The interest rate you are paying on your debt may be high. Call your lender and ask them to lower the rate. You will be most effective if you know the marketplace and understand what interest rates might be available to you from another lender. Do not forget to ask if the rate reduction can be retroactive.
• Reduce Your Overall Debt Amount: Sometimes a credit card company will be willing to reduce the total amount of your debt. For example, if you borrowed $4000 five years ago, you might currently owe $10,000 -- due to interest. Talk with your lender about your situation and the options available to you.
• Set-up a Payment Plan that Meets Your Payment Abilities: If -- due to difficult circumstances -- you cannot pay your bills, talk with the companies and set-up a payment plan that you can abide by.

Beware of Debt Consolidation Companies, Debt Counseling and Credit Counseling

There are innumerable companies that claim to help you consolidate your debt through debt negotiation --- some even offer free debt consolidation services. There are reputable for-profits and non-profits offering debt consolidation services and debt consolidation help. Many of these credit counseling companies may be able to negotiate better with your creditors, but some have a bad reputation for hurting your credit report in the process. You may be better off paying for the services of a certified financial planner or tax advisor.