What Are Informal Debt Agreements?
An informal agreement is an agreement entered into by a debtor with his creditor, without having to undergo the legally binding process that affects his credit rating. Often a debt advisor negotiates these terms to find a mutually beneficial agreement, but a debtor may also decide to contact the debtors and negotiate on their own behalf.
If you are thinking of refining your debt repayments and getting back on track, consider an informal debt agreement as the best option for both parties. We will discuss more informal debt deals and how they can help you put your strengths to the control of your finances. Below is a checklist provided by Dealing With Debt to help you explain the negotiation of new terms for unmanageable debt.
- Avoid the National List of Personal Insolvency Indices
- Reduce your repayments
- Find temporary relief with a waiver
- Reduce interest rates on debt or offer a repayment amount lower than the original total.
- Determine if an informal debt agreement is for you
Avoid the National List of Personal Insolvency Indices
When entering into a formal debt agreement, a person agrees to have their name listed on the National Personal Insolvency Index (NPII) for 5 years. If a person goes bankrupt, she will stay on this list forever. For a fee, anyone can access the NPII list, which can make future funding very difficult.
An informal debt agreement serves both the debtor and the creditor by giving the debtor the ability to repay the loan under newly negotiated terms, without the penalty of investing in the NPII.
Reduce your repayments
An informal debt agreement produces multiple and flexible results. The key is to find what works for you and the creditor, and keep your name outside the NPII. To do this, you can negotiate a lower repayment and extend the term of the loan.
Find temporary relief with a waiver
Another option with an informal debt agreement would be to find temporary relief by delaying your repayments for a while. You can show proof of your inability to make repayments and request a delay to delay repayments until your situation improves.
Reduce interest rates on debt or offer a lower payment amount
Two other viable options for reducing debt are to reduce interest rates on an extended line of credit that you consider impossible to maintain or offer a repayment amount satisfactory to the creditor.
Determine if an informal debt agreement is for you
There are a number of ways out of debt, and an informal debt agreement might be your solution. In order to determine your best options for reducing your debt as quickly as possible, it is worthwhile to contact a debt advisor.
A debt advisor can assess your situation, help you develop a budget plan, and even negotiate with creditors on your behalf.
Take control of your debts today by considering informal debt agreements instead of a formal debt agreement. Think about talking to a debt advisor to assess your financial situation and advise you on your best decision.