Defining: Debt Negotiation

Debt negotiation aka debt settlement, it is related to debt consolidation because they are actually the second option that is available to those who are unable to meet the monthly payment requirements of a debt consolidation loan. Since this is a genuine situation for many debtors, this results debt negotiation for gaining wider usage. These types of settlement plans exist to help reduce the burden of the debt or eliminate it entirely.

The Benefit:
One benefit of a debt negotiation program is you stop making payments to your creditors. The debt negotiation company either takes monthly payments from you then keeps it in an account, or if you want, you can keep the money in your own account.
While you are making these monthly payments to the debt negotiation company, they negotiate with your creditors for a lower payoff of around 40-50% of your total amount of debt. Once the negotiated settlement is agreed upon with your creditors, the debt negotiation company makes a one-time payment to them.

The Fall:
A downfall of debt negotiation program is it lowers your credit score for as long as you are in the program. However, most debt negotiation companies require the creditor make the credit report show paid in full so it doesn't show up as a negative on your report once your account is settled. At the same time, this con can be neutralized if creditors are asked by the settlement companies to take out a revised credit report, which shows that the debt has been completely paid off.
Some debt negotiation companies include a credit repair service that will remove the negative items caused by the debt negotiation program.