5 myths about Debt Negotiations

Posted on: 22 Oct 2018

When you need help with debt, the promises you hear from companies who assist people with debt negotiations can be questionable, but is it really that easy and can these companies really deliver?

Is settling your credit card debts for less than what you owe really that easy? And what are the consequences? If you’re in financial hardship, before you decide to try debt negotiation yourself, make sure you know the difference between common myths and the truth.


Myth No. 1: Anyone can get their credit card balance cut in half for any reason.

The truth: Legitimate debt negotiation companies qualify clients, including asking for details about their financial hardship position, if you’re not experiencing financial problems then a debt settlement is unlikely. If you do need help with debt, the first step is to do a budget. You need to establish if you have a financial hardship problem, or simple a budgeting problem. Get a budget planner to assist you if you need help with debt.


Myth No. 2: I can negotiate the debts myself

The truth: Yes, you can negotiate a settlement yourself, you can also build your own house, wire your own electricity and act as your own broker on the stock market. You pay a professional to complete a job that will maximise the benefits for you. A good negotiator will typically have 15+ years industry experience, this can cost, however, it will likely cost you a lot more if you negotiate your debts yourself.

Don’t be cheap, pay the professional who will save you time and money.


Myth No. 3: I have to pay upfront for debt negotiations and the settlement company controls my money.

The truth: Good negotiators will not control your money, rather you retain the funds and pay the settlement amounts yourself directly to your debts once you receive evidence of the settlement agreements from the debt negotiator.

Make sure you do a budget calculator to ensure you can afford the settlement.

Though some companies will charge an upfront fee, this is by no means a reflection on their overall value for you. Rather, to establish their worth, do your research to assess if their any good.

Many debt negotiators will not charge until the job is completed, this is a much safer alternative, especially if you’re in financial hardship in the first place.


Myth No. 4: Debt negotiation will hurt my credit score.

The truth: Most debt negotiations will be applied for through the financial hardship process. To date, the banks will not report your financial hardship to your credit report. Only on rare circumstances of very serious credit infringements do banks consider reporting the arrears to your credit file.


Myth No. 5: Debt negotiations are my only options when I can’t pay.

The truth: If you’re in trouble with debts, you always have options.

For example, if you lose your job, call your bank, you can apply for a 3-month payment moratorium under s73 of the NCCP. There are other options that are not so palatable, such as Bankruptcy or a part 9 debt agreement.

However, if you need help with debt and you cannot afford your credit card repayments, one of the best outcomes will be a negotiated settlement agreement. This said, every circumstance is different, and you should explore all options to assess what outcome is best suitable for you.

If you need a debt negotiator, or help with debt, speak to us or connect with us at www.creditmediation.com.au

If you want to find out how much you can save to help you with debt, try our debt calculator. or contact us.

This article should be considered as a guide only. If you are facing financial hardship or legal recovery action, please consult a specialist to assist you.