Most debtors admit that negotiating with creditors is something that they have to do but often avoid doing. Having outstanding bills but not having the money to pay them can be quite stressful experience. Unfortunately, instead of facing the credit card companies and other lenders our reaction is running away from them.
Is dealing with your creditors the right move? If so, how can you get your creditors on your side? The followings are some tips to help you negotiate with creditors or debt collection agencies on your own. But before contacting and dealing with creditors it is important that you learn how they look at you as a debtor and how they will react if you don’t pay your bills.
What Creditors Expect You to Do
As creditors are in the business of making money once they have given you a loan all they expect in return is for their account to be paid. They are reliant on getting the accounts paid on time to cover their expenditure otherwise they might be faced with financial difficulties themselves.
When you can’t pay your creditors they want you to contact them as soon as possible to explain the situation. To help them know that they will be getting their money, even though there will be a delay. They want you to assure them that you will pay the account as soon as you can.
By remaining in contact with them on a regular basis you’ll put an end to unnecessary harassment and build some forms of trust between you and them. If you remain silent, not responding to their requests for payment, they will turn the bills to their collection department or a third-party debt collector. They may also take legal action/s such as repossession or foreclosure, legal judgment, and bad credit report.
When to Contact Your Creditors
Timing of communication with creditors is key. You will need to let them know your situation as soon as you realize that you don’t have the money to pay off your bills. If you wait until you have missed a payment you will create a delinquent image and not a responsible image.
Early intervention offer many benefits. Your creditors will be willing to offer solutions to the problem if they are aware of your situation. They may eliminate late charges, offer the option of paying only for the interest or even defer your payments. While you are still able to enjoy their service your account will remain under their care instead of a third-party debt collection agency.
Create a Debt Repayment Plan
You will need to figure out a realistic repayment plan that is affordable to you. Before negotiating with creditors make sure you have a clear idea about the amount of money that you can and are willing to pay.
List down all your expenses starting from fixed payments, like mortgage and auto loans, to flexible expenses such as clothing and fun. Calculate how much is left over from your income after you have paid off your debt. If you want to reserve more funds for paying off debt you might want to reduce flexible expenses or find ways to incur extra income.
As different creditors may have different priorities for repayment make sure that you give priorities to them so. For example, creditors from law enforcement agencies should be on top of your priorities because they may disrupt your tax return, collect your income, and many others.
Steps to Negotiating with Creditors
Contact your collection agencies over the phone. A pre-composed script that clearly gives the details of your situation will help you start negotiating with creditors. During the conversation take note of what the other person is telling you and send a confirmation letter stating what you have agreed upon to safeguards you from possible denial and inconsistencies in the future.
Alternatively, you can send a letter, which states your financial situation and reasons why you get behind on your payments. Enclosed your letter with a detailed repayment plan that shows the name of creditors and how much you are able to pay to each one of them each month. The hardship letter to creditors should act as a proposal that requires acceptance from them.
By negotiating with creditors you could bargain for better repayment terms, deferred payment schedules, and even other possible arrangements. However, don’t be so relieved that you agree to a new repayment plan. Instead, find ways to pay them on time and be ready to renegotiate the plan if your source of income is decreasing or less than what you planned.
Overall, don’t expect your creditors will forget about your credit debt. Although you are protected by the Fair Debt Collection Practices Act (FDCPA) you’ll still remain responsible to pay off all your debts. And if you can’t negotiate with creditors by yourself don’t be shy to get help from a reputable debt relief company.