• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Financial Wellness

You are here: Home / Budgeting / How To Negotiate With A Creditor

How To Negotiate With A Creditor

August 18, 2016 by Katie Bentley

Debt can be overwhelming, but it does not have to be.

The thought of negotiating with your creditors may feel scary but by doing so, you can help yourself and your finances tremendously.  

Household debt is on the rise

A recent report found that household debt had increased $434 billion from last year.

Auto debt has grown $97 billion; and student loan debt rose $69 billion, while mortgage debt has grown a staggering $246 billion.

How To Negotiate With A Creditor

Mortgage debt has always remained the leading contributor towards debt.

However, since 2010/2011, student debt has started to increase, and finally broke the $1 trillion mark.

How To Negotiate With A Creditor

While in most states student loan debt far surpasses auto loans and credit card debt, Texas and Nevada are two of the few states where auto loans exceed other debts.

How To Negotiate With A Creditor

Household debt to GDP increased to 79.2 from 79.10 at the end of 2015.

Household debt to GDP has started to decrease from 79.9 down to 77.1 however by mid-2015 figures rose to 79.1.

Since 1952, the highest recorded figures were 95.50 at the end of 2007, and the lowest recorded figures were 23.40 at the beginning of 1952.

What will negotiating with my creditors mean for me?

The best way to deal with creditors is by ensuring you keep up with your monthly payments and pay in full each month.

This, however, is not always possible because unexpected circumstances can mean that we are unable to continue to pay creditors.

Many Americans remain unaware of their options when they find themselves in debt, many may feel that bankruptcy is their only option.

Bankruptcy, however, should be a last resort as the financial repercussions can be severe.

Finwell - How To Negotiate With A Creditor

While negotiating with your creditors can have a positive impact on your finances you may have to pay taxes on your agreement and find your credit score negatively impacted. 

So, how should you go about negotiating with creditor?

Be honest

When you initially contact your creditors, it is important to be frank with them.

You do not need to give them a long drawn out explanation, but you should be direct and explain your circumstances to them as truthfully as possible.

It does not matter why you have fallen behind on your payments, do not attempt to lie or hide facts.

If you have found yourself unemployed or sick, then let them know.

Creditors will appreciate your honest approach and willingness to work with them to come to an agreement.

Do not allow your emotions to show

It is not unheard of for creditors to hire negotiators trained to expose your emotions and use them against you.

 

When dealing with creditors, it is best to approach them on a professional level rather than an emotional level. 

Click to tweet

If you do feel that your emotions are getting the better of you, then it is advisable that you end the call and try again once you have calmed down.

Do not make excuses for putting an end to the call; just calmly tell them you need to go.   

Prepare yourself by knowing your rights

It is important that you know your rights before you start negotiating with creditors.

It is illegal for creditors to harass you, so it is important for you to know what counts as harassment.  

The FDPCA are in place to ensure that your consumer rights remain protected.

Keep records of everything

Maintain records of all incoming and outgoing communication.

If you speak to a creditor on the phone, record the time, date, who you talked to, and a brief summary of your conversation.

If you send a letter, ensure that you send it via certified mail.

All of these steps will ensure that you have a comprehensive record of all communication; this may come in handy for future reference.

Create a financial plan beforehand

It will be beneficial if you work out exactly what you can afford to pay before you start to talk with your creditors.

By creating a financial plan you can work out exactly how much you can afford to repay each month or if you can afford to pay a lump sum.  

It is important that your financial plan is realistic and that you can keep to any payment plan you offer.  

Avoid collection agencies

If your debt goes to a collection agency, then this will not only affect your credit score, but will also affect your ability to obtain credit in the future for seven years.

 

It is imperative that you try to negotiate directly with your creditors before they send your debt to a collection agency.   

Click to tweet

Get all agreements in writing

It is critical that you get any agreement between you and your creditor in writing.

This will minimize the risk of your creditor backtracking, changing, or denying any agreement at a future date.

Ensure that your written consent include details of how much you owe, fees, interest rates, all payment details, and terms.

This should include the amount and length of payments if you are paying in monthly installments.  

Seek help from a credit-counselling agency

If you find the negotiating process overwhelming then, a reputable credit counseling agency will handle the whole process for you.

They will be able to go through your finances and work out how much you can afford to repay.

They can also contact and negotiate with creditors on your behalf.

It is in a credit counselling agencies best interest to ensure that they get the best deal for you; they will also find it easier to remain detached since they are doing their job.  

Sponsored Link: If you need help dealing with creditors, click here

Move forward

Finwell - How To Negotiate With A Creditor (2)

It is important that you learn from your debt and move on so that you can look towards a brighter and financially healthy future.  

Filed Under: Budgeting, Get Out of Debt

Previous article: 6 Things To Cross Off Your Financial To Do List By 50
Next Post: Top Financial Tips for Unmarried Couples

Primary Sidebar

Follow Us







RECENT ARTICLES

  • What is Chapter 11 Bankruptcy and How it May Protect BusinessesWhat is Chapter 11 Bankruptcy and How May It Protect Businesses?
    Chapter 11 bankruptcy isn’t uncommon, yet many fail to see its purpose. Most people have heard of Chapter 11 vs Chapter 7 liquidation, or even [...]
  • Personal Loans After Bankruptcy Discharge: Is This Possible?Personal Loans After Bankruptcy Discharge: Is This Possible?
    Applying for personal loans after a bankruptcy discharge? Getting approved may not be easy, but it still is possible. It will definitely require [...]
  • How to Stop A Student Loan Wage GarnishmentHow to Stop A Student Loan Wage Garnishment
    Student loan wage garnishment is the last thing you want to experience while paying student debts. Monthly wage deductions could ruin your spending [...]
  • Don’t Miss These Posts On Financial Wellness..
    Here’s what happened on Financial Wellness 1. How to Start Investing in Stocks Even With Debt If you’re in debt, then you might be afraid [...]
  • Credit Repair Credit Cards: Learn to Rebuild Your CreditCredit Repair Credit Cards: Learn to Rebuild Your Credit
    Trashing your credit score is so much easier than building a solid credit rating. It’s no wonder so many people seek out credit repair credit [...]
Instagram did not return a 200.

Connect With Us On Instagram!

Footer

Financial Wellness

© 2021
FinancialWellness.org
All rights reserved

  • Privacy Policy
  • Terms and Conditions
  • Contact Us

This Copyrighted Material may not be republished without express permission. The information presented here is for general educational purposes only. Material Connection Disclosure: You should assume that this website has an affiliate relationship and/or another material connection to the persons or businesses mentioned in or linked to/from this page and may receive commissions from purchases you make on subsequent websites. You should not rely solely on information contained on this page to evaluate the product or service being endorsed. Always exercise due diligence before purchasing any product or service. This website contains advertisements.

FOLLOW US

  • Facebook
  • Twitter
  • Instagram