Week 12: How To Negotiate With Creditors

You are reading Week 12 of 52 Weeks to Eliminate Debt & Curb Spending.  Please read the overview here to learn more about the series & get your FREE financial planner.  If you just joined us, please start with week 1.

One option I mentioned last week when talking about how to avoid bankruptcy, was you may need to know how to negotiate with creditors. As your debt is piling up, you have to find a stopping point at which you can reverse the problem. Sometimes that means sitting down with pen and paper and a telephone to go the old fashioned route of calling the people you owe and figuring out a solution with them.

How To Negotiate With Creditors:

Be brutally honest. When you call a creditor to attempt a negotiation you have to be honest.  No lying to say you might be able to come up with more money next month. Make it very clear where you are currently financially, and that improvement may take time. Tell them what you can do, instead of focusing on what you can’t do.

Being honest with a creditor is what they need.  They need to know what to expect. Don’t promise on something you know you can’t deliver.

Make it a win-win situation.  Being willing to compromise (if your budget allows), can create a better chance for negotiations. Approaching a creditor and working with them to create a new payment amount, lower interest rates or even settle an account for a percentage of what is owed can all be great ways to get out of debt and avoid bankruptcy, foreclosure or repossession.  The creditor gets some money and you

Be prepared with honest numbers. Seriously look at what you can afford to do. If that is only $25 a month, tell your creditor that. Take the time to prep before you call by looking at your account history. Look at the total balance, current and past interest rates, how old the account is, and then look at your finances. While you always want to offer more payment, go with the lower amount you are certain of. You can always pay more than promised.

Be prepared for rejection. Most creditors will work with you when you contact them and make an effort. However, there are occasions where rejection is a possibility. You have to prepare yourself to be told no, or to have a creditor present a counter offer. Don’t give up when this happens. Instead work toward meeting them at their offer and working to pay down the debt more, so you can come back for further negotiations.

Talk to the right person.  Most customer service reps are not able to authorize such changes to your account.  You will need to speak with a supervisor or someone in collections to take the necessary steps to negotiate your account.  If the first answer is “no”, respectfully ask to speak with their supervisor or someone authorized to discuss a solution.

Be Polite.  How many people do you think call everyday and are angry, mean and rude?  Even though it can be difficult, be polite and courteous.  You are far more likely to get assistance if you are kind rather than difficult.

Keep a record.  Get all settlement offers in writing and read the details carefully.  Write down all phone conversations including when you called, who you talked to and what you discussed.  Keep a folder with all this information including any other correspondence and statements.

Knowing how to negotiate with creditors will help you to make the most of your efforts to pay down your debt. Negotiations include everything from lower interest when you have an account in good standing, to lower payments or a settlement when debt has gotten out of control. Financial debt relief can be found when you are willing to work hard and think outside the box.  Don’t give up.  As Thomas H. Palmer said, “If at first you don’t succeed, Try, try, try again.”

Disclosure:  I am not a financial adviser nor do I have formal financial training.  All articles are for informational purposes only and should not be interpreted as financial advice or consultation.  Please consult your account and/or financial adviser before making changes to your finances.  All situations are different, so please consult a professional to determine your individual needs.