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Monthly Archives: October 2018

Negotiate Business Debt

Time can be a business’ enemy or friend, depending on how soon the debt is acted upon. Immediately contact creditors and explain the current debt situation. Ignoring lenders will make the situation worse. Tackling a debt problem in the early stages will make the process easier to resolve.

It is in everyone’s best interest to find a solution, so lenders should work with businesses to lower interest rates, increase the credit line, and restructure repayment options. Dealing with multiple creditors or collection agencies can take away from running the business. Reputable debt consultants can negotiate with creditors to settle debts for less than what is owed.

Creditors are terrified of losing the money they loaned out and need to remove the debt from their books. They will respond positively to efforts in starting the negotiation process of debt collection. Debt negotiation means creditors have the chance to recover some or all of its loaned assets.

Be prepared to put down some money. Lenders may want at least half of the loan up front. Creditors may not even negotiate until some money is given over. This is where a consulting company is useful – they could get businesses a lower upfront fee to begin negotiation.

When a payment is made to the creditors with a credit card or bank account, the creditor then has all of the owner’s banking information. If an owner gets sued during the process, the creditor has this information and can get at an owner’s funds easily. Instead of these payment methods, pay debt with a money order so information is secure.

Creditors are willing to settle for less in order to guarantee they get something back. Many business owners should expect to pay less for a lump-sum payment. Owners need to demand the debt be shown as paid in full on the credit report. Fully paid or debt satisfied is the kind of language owners want to see on a report. Debt still active is not want owners want.

Do not back down and accept a repayment deal that is too much for an owner to pay. Do not agree to any debt payment plan that cannot be afforded. Owners need to tell creditors what they are willing to pay. Let them know if they demand more, the owner will be forced into bankruptcy where creditors receive no payment whatsoever.

Find out how far a creditor is willing to go. If they offer three months at no interest, try to get six months. Always aim for a higher deal and understand how much negotiating room there is to work with a personal budget.

A lawyer may have to get involved if there is a substantial amount of debt. Most creditors have agents or customer service reps to handle debt negotiations. A lawyer can also be helpful if negotiations are going nowhere, or if a creditor does not fulfill their end of a settlement. Having a lawyer early on means a written settlement contract and smooth negotiations.

When Hiring Debt Collectors

They free up your resources and time. This is one of the advantages of choosing to use professionals to recover your money. Truth is collecting debts can be time consuming, especially for individuals and small businesses. It is something that would need making lots of calls and arranging meetings to try reach payment agreements. Some may even decide to avoid you at all costs. When you get a third party to do the work on your behalf, you end up freeing time and resources and at the end of the day your chances of recovering are high.

They have tools you may not have to make the process more efficient. It is easy for you to lose touch with your debtors. The professionals have advanced tools you may not have to help them locate and also communicate with the debtors. They can easily be granted access to debtor information from third party sources and use advanced telephone technologies to find them.

They know how to collect where you can’t. The professionals know how to approach the debtors so they hook them and compel them to start repaying what they owe you. Even though delinquent debtors may not be responsive to your efforts, when a third party interjects and remains assertive and consistent it is highly likely that they will feel obligated to do what it right. The professionals have what it takes to deal with even the most stubborn of debtors and will keep insisting until they start giving in.

They could affect client relations. This is especially the case when you choose a collector who does not have good communication skills and does whatever it takes to recover the debts. Considering that some debtors may have genuine financial reasons making it harder for them to repay, they may end up looking for business elsewhere when they are harassed or rudely handled by your representative once they pay up. It is therefore important to choose debt collectors who are professional enough to maintain your client relations even as they try to help you recover what is owed to you.

Unexpected Consequences of Bad Credit

Employment

Like it or not, employers address credit reports of their applicants and employees to make even more informed decisions when hiring or firing. More than 50% of large companies run thorough background checks of their prospective employees. This may sound unfair, and it probably is, but this is something you must remember the next time you swipe that plastic or miss on a payment. Potential employers may rate your responsibility level based on your financial report, so if you aspire for a position in one of the major companies, prepare for that check.

As a result, applicants with poor credit may have to take on jobs that pay $10.000 less than the applicants with better financial score. That is 100.000 in ten years’ time!

Insurance

Customers with a poor score sometimes pay twice as much for a car insurance than the ones with an average score. Why would car insurance companies make it so rough for those who struggle the most? Insurance companies assume if you have been irresponsible with your finances and got yourself into the bad score trouble, you might also be an irresponsible driver. And the same goes to all insurance companies, not just those dealing with cars. They all pull your credit reports, alas.

Rent

Rent is probably one of the worst hidden consequences of having a bad credit. While rentals are probably the only thing that do not get recorded in your financial report your being the most responsible rent payer does not show anywhere in your financial history.

On the other hand, landlords do want to inquire into your credit report. How ironic is that? Landlords want to feel comfortable renting their property to you, so once they see your far from perfect score they can choose to charge you a deposit that is double or triple as high as if you had an average score. This is especially true with rentals in large cities like New York and Los Angeles.

You may want to put yourself in the landlord’s shoes: if the renter has a history of being late or missing on car insurance payments and credit card bills, there is a high probability he may be equally irresponsible with his rent.

Likewise, if you want to buy a home, bad score will get you into a higher mortgage monthly bill.

Monthly Income

You may know that having poor score means you have to pay high interest rates, but you may not know the actual cash behind those scores. You may want to sit down with all you bills, credit cards and calculate how much you are paying in interest rates on each of the items in your debt list. Then, sum that up and take a sober look at the staggering cash amount you pay out every month.

One more item on the cash list is utilities. Folks with a poor score often have to pay significantly larger deposits to get their utilities turned on: water, heat, electricity and so on. Ridiculously, you may even pay more on your cell phone bill because poor score forces you to opt for a prepaid service rather than the regular monthly service.

Common Types of Debt

Business

Substantial business debt can soon build up while attempting to grow your business, expand into new markets, or buy new stock. This is often seen when it is necessary to borrow money to raise the desired capital. From business credit cards and loans, as well as the wide range of overheads involved in running a business, it is very easy to let things get out of control. In times of a difficult economy this can quickly make things a lot worse. Any difficulties with business debt should be tackled as soon as possible. Prioritize the outstanding payments and look at professional financial advice or seeking other consolidation options.

Home loan

Borrowing money to purchase a home is a must for most people. A home loan is likely to be several hundred-thousand dollars. This makes it the biggest financial responsibility and lasts for a good number of years. Plus, there is the need to consider the interest charges that will be applied over the lifetime of the loan.

Financial discipline is essential when taking out a home loan. There are a few steps that help pay down this debt, such as looking for rates elsewhere every so often and making extra payments if possible to speed up the process.

Credit card

Credit cards give instant gratification and make it easy to spend money that you don’t really have. Many people spend without thinking about the long-term consequences. If it isn’t possible to pay back the money spent before the interest charges come into effect, the debt will soon start to rise. While the credit cards are convenient, they can have very high interest rates, with some rates at 20% or more. Also, if this type of debt is spread across several cards, the risk of the debt getting completely out of control is that much more possible.