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. But before considering contacting the
lending companies 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 will put an end
to unnecessary harassment and build some form of trust between you and
your creditor. But if you remain silent, not responding to their
requests for payment, they will turn the bills to the collection
department or a third party debt collection agency. 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 the key here. 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 those
debt collectors or credit reporting agencies.
What to Prepare before Negotiating with Creditors
Once you understand their point of view and the
right time to communicate with them 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 accordingly. 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.
How to Talk to Your Creditors
Contact your
creditors 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.
Even though you are protected by the
Fair Debt Collection Practices Act (FDCPA) you will still remain
responsible to pay off all your debts. Also, if you
cannot negotiate with creditors by yourself don't be shy to get help
from a reputable credit counseling agency.
