How Debt Mediation Affects You
Debt mediation is a way of settling your debts by having your debt mediator negotiate an overall lower debt repayment with your credit providers for you. Your debt mediator will achieve this by settling your account with your credit providers for a percentage of your debts. Naturally, your credit score will be affected by debt mediation, but this will depend on the amount that you owe, what your credit providers do, how much credit you have and how long the process takes. Debt mediation involves working together with your credit providers to arrange a new debt repayment plan that suits you both. The aim, of course, is to settle with your credit providers for a reduced amount that you both find reasonable. Credit providers might agree to a lowered payment because this will, at least, not leave them completely empty handed, whereas, if they went to court, there is a chance that they might walk away with less or nothing. Debt mediation deals with only one credit provider at a time, so you will have to attend a number of negotiations in order to reach agreements with each of your many credit providers, which can be a very time consuming practice. You and your credit provider will either agree upon an amount and you will pay them this or they might find your suggested amount unreasonable and decide to go ahead with court proceedings, which will be to your disadvantage as you will not be protected by the law, as you would have been under debt review. Debt mediation will lower your credit score in the short-term. Furthermore, if you stop paying the credit providers during this process, they will continue to report you to the credit bureaus. Also, your credit provider may add interest and late fees to the amount already owed, causing your total debt to go up. Debt mediation is not the right choice for everyone and does present risks to the debtor, however, if you are able to reach an arrangement with your credit providers, it could turn out to be a very cost-effective option. Your debt mediator at Reduce My Debts will advise you on the best debt solution for you and, if we feel mediation is too risky given your circumstances, we will provide you with other options that are more suited to your personal financial situation.
