Money is an essential need in life. You can negotiate or bargain prices and get them reduced by a certain percentage in most cases. Price reduction occurs everywhere, whether to attract or make liquidations, but it happens. Proper money management also helps you in debt settlement.
Debt negotiation is the process by which your debts are negotiated with your creditors. The negotiation can be carried out by yourself, or you can hire a specialized company to negotiate for you. There are financial companies that oversee negotiating with the creditors, reducing the debt, eliminating the rates for late payments, reducing the interests, etc.
Why does a creditor allow a debt reduction?
The creditors try to recover as much money as possible from their debtors. Since it is expensive for creditors to get the outstanding payments, they are usually willing to renegotiate a debt to secure at least an amount.
Also, when you can declare bankruptcy, your creditors know that they will not have the opportunity to recover their money if you do, so in most cases, they are willing to negotiate.
Which of my debts should I pay first?
Sometimes, we can worsen our financial situation, a blip, and you can’t make a deal with all our payments immediately. On other occasions, the opposite happens: we get money, expected or unexpectedly, and we want to pay part of the debts we already have.
What debts should I pay first?
To make a list of priorities in payments, we are going to base a clear concept: which debts are more damaging to me if I do not pay them. According to these criteria, we should pay the payments in this order:
Debts with guarantee or guarantee of payment
For example, a mortgage loan. The non-payment of the credit will finally lead to the loss of the mortgaged property. Therefore, they affect our situation decisively and are debts that can change our standard of living.
Debts for which I can suffer wage garnishments
The non-payment of these debts may result in us receiving part of our income, making it easy for us not to pay other payments worsening our financial situation. These debts can be, for example, alimony to children or the non-payment of some tax.
Debts for essential services
There are several debts whose non-payment can restrict the enjoyment of some essential services, such as food, electricity, drinking water (among services, essentials), or the pharmacy if you are chronically ill.
Debts without endorsement
Debts whose non-payment will not mean the loss of our assets or our income, but that can be brought to justice later by the creditors (and then can be converted into debts that cause wage garnishments or even loss of personal property). Internet bills, telephone (non-essential services), personal loans, credit, purchase cards, etc.
Debts with people
Debts with relatives, friends, or acquaintances usually lack a written document (they are loans between individuals with the verbal acceptance of both parties). These debts will be returned once those of the previous categories have been satisfied. People who have left us money may be angry, but that will be the maximum variation of our situation. It will not hurt to inform the lenders of our situation and record our intention to pay as soon as possible.
Debt settlement – Strategies and risks
People cannot cope with debt management issues; that is why they prefer the debt settlement program. They are those clients that are paying their debts, including sporadic ones, as they have minimum negotiation ability. As a result, they need to restrict such payments at a time. The debt settlement process also affects the credit scores, especially at initial times. Your credit score will repair with time if you start settling debt payments.
Your credit score disturbs you when you must pay off debts that are greater than you owe. If you delay your debt settlement process, the tag of late debt payment will be on your credit score report for around seven to ten years.
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