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.

Lenders know there is no criminal liability for debt and no debtors prisons, so they know their options are limited. When a debtor cannot or refuses to pay, a lender can report the default to a credit bureau and/or take the debtor to court. Unfortunately, neither of these options carries any guarantee of payment and pursuing a court judgment can be extremely expensive. Lenders are motivated to find way to reduce their costs while still receiving payment on the outstanding debts owed them.

The result of this is understanding is that many lenders are willing to negotiate with borrowers if such a negotiated settlement is likely to result in repayment as opposed to default. The lenders goal is to collect as much of the outstanding debt as possible without paying out additional money to guarantee this result. Collection efforts and court remedies all cost money that the lender would rather not pay out if it can be avoided.

Renegotiating loan terms and payments is a good way to go for both the borrower and the lender. The goal of the lender is to have the debt repaid as much as possible, so even though they have to give up the original loan terms lenders realize this is preferable to court or collection fees. This practice has become so prevalent that many companies and banks now have special hardship departments for handling these situations. They receive the renegotiation requests and then can negotiate reduced payments and other terms of the loan or credit card.

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.

If you are truly incapable of paying back your debt you have nothing to lose by attempting to renegotiate your loans, and everything to gain. Remember that although the renegotiation process can be quite time consuming, and the lender may want documentation to substantiate your hardship situation, the result can be quite rewarding. Even if the lender refuses to renegotiate, you have put forth the effort and you are in no worse a position. There is satisfaction in making the effort.

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