Debt management firm isn’t necessary to negotiate with lenders

Dear Experian,

Debt management companies are able to negotiate lower interest rates on unsecured debt. Can consumers do this themselves? Would it be viewed the same as having a debt management company do this for you?



Dear ANN,

You certainly can work with your creditors directly. The earlier you contact your lenders about payment challenges the better. In most cases they will work with you to find ways to work through difficult times.

It’s best to contact your creditors as soon as you know you are going to have difficulty making payments but before you have missed payments. The creditor may then be able to work with you to reduce the payment amount, for example by extending the loan repayment period. Doing so will enable you to make the payments and still repay the entire debt in full.

If you have already missed payments, you may still be able to negotiate with your lender to reduce payments or settle the remaining debt. However, the missed payments will already have damaged your credit history, and settling the debt will also have a negative impact.

The term “settled” indicates that you did not repay the debt in full as originally agreed. That is a sign of risk and so will hurt your credit history.

When you work with a debt management company, it negotiates with the lender on your behalf. Debt settlement firms may charge a fee. If you can negotiate with the lender directly, you may be able to work through your problems, reach the same type of agreement and save money at the same time.

Thanks for asking.

- The “Ask Experian” team

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