With the current economic situation all too many people are finding themselves unable to pay their loans as they were written originally. No matter whether you have lost a job, become debilitated even temporarily, or have new expenses the situation can be nerve wracking. What makes it worse is not having tools to deal with it. It comes as a surprise to most debtors that they can renegotiate their loans. By working with their creditors they can negotiate reduced payments, a better payment schedule, and even have some fees removed so that they can again manage their debt situation.

There is no criminal liability for debtors; this means no debtors prison, and lenders know that they have few options available to them when a loan defaults. When a debtor cannot pay or refuses to pay, a creditor can report to the credit reporting agencies or chose to take the debtor to court. Neither of these options are not a guarantee of payment. Reporting to a credit bureau only hurts the debtors credit and taking someone to court is extremely expensive.

Because they are aware of these limitations and the fact there is no guarantee of payment many lenders have become open to renegotiating loan terms and payments. They know that this route has a greater chance of having the outstanding balance repaid. Of course, lenders wish to regain as much as possible from the outstanding loan amount without losing any more money to courts and collection agencies. Negotiating reduced payments and loan terms can make it possible for the defaulting debtor to pay off their debt and begin rebuilding their credit standing.

Therefore, negotiating more tolerable terms for an existing debt is in the interests of both the lender and the borrower. Most professional lenders understand this reality, and though ideally they want the loan repaid by the original terms, renegotiating these terms is a lesser evil than a default and collection efforts. In fact, many large credit card companies and banks maintain special hardship units whose sole purpose is to listen to appeals for relief and renegotiate the terms of loans.

The renegotiation process is fairly simple. Contact the company that made the loan you need to renegotiate. When you reach the person that is empowered to negotiate new loan terms clearly explain your situation in detail and have a plan for repaying your loan. This shows the lender that you are making a good-faith effort towards repaying the debt you owe and will go a long way towards obtaining better terms. Even though this can be a stressful process it is important to remember not to become aggressive; you have reached the person who can actually help you so treat them with respect.

It can take quite some time to renegotiate loan terms and the lender may wish to see any documentation you can provide to verify your hardship claim. Though it is a long process it can be rewarding to have the satisfaction of paying a debt you owe and not harming your credit further. You have nothing to lose. If you really are unable to pay your debt then the worst that can happen is that the lender will chose not to renegotiate. Ultimately, you would be no worse off than if you had not made the effort.

Wendy Polisi is the founder of Credit Repair College and Finance the Dream. Finance the Dream is the nations leading provider of Lease Option Homes,offering homes throughout the United States. For more information on free credit repair please visit her at Credit Repair College.