How to Negotiate With Creditors
If you’re having trouble paying on debts because of a job loss, medical bills, or other unexpected event, it’s better to try and negotiate with your creditors than with a debt collection company. Negotiating a settlement or payment plan with creditors can keep your delinquent accounts from going to a collection agency.
Contact your creditors and use the following tips to mow down that pile of debt.
- Offer a lump sum settlement if you have enough cash in savings. Some creditors may accept settlements as low as 50% of the total balance due. Others may only accept 60% to 80% of the total.
- If you don’t have a lot of cash, ask for payment plan where you can make affordable monthly payments until the debt is paid off. Ask to have negative information deleted from your credit report when the account is paid in full.
- Let your creditors know that you’re trying to improve your financial situation and will be responsible for paying your debts.
- Create a budget before negotiating debt so you’ll be able to show creditors your action plan for getting your finances together.
- Get a written agreement for your settlement or payment plan. Keep careful records of phone calls, letters, and notes.
Not all creditors will agree to a settlement, but it can’t hurt to make a phone call to plead your case.
Post written by Francine Huff
12 Responses to “How to Negotiate With Creditors”
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno.
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December 12th, 2008 at 6:21 pm
You have some good points, Francine. How are creditors reporting these negotiations on borrowers credit reports? Is there a way for those who are negotiating to protect their credit? Should those working with creditors get this in writing as well?
Thank you. S
December 14th, 2008 at 2:17 pm
Hi S.
It will show up as settled on your credit report. When netotiating a deal you can ask your creditor to report the account as “paid as agreed” once the total balance has been paid off. Some creditors may be willing to do this but many won’t. You should ask for a letter in writing that outlines your settlement, but some creditors may refuse to give you one.
Francine
January 10th, 2009 at 7:40 am
Hi Francine,
First and foremost, I want to gain control of my major debt. I’ve been laid off for some time now and my credit has gone south. I have several accounts in collection agencies, but how can I negotiate when I have little to no positive cash flow. I recently receive government help to feed the family. Should I wait to until I land a job and review my financial situation then, before contacting the collection agencies? If so, I can’t make an offer to pay when I don’t have positive cash flow. I’m basically living on faith right now. How will these creditors deal with someone in my situation.
January 10th, 2009 at 1:46 pm
Hi FReels,
You are obviously in a very difficult siutation because of your job loss.
Generally you do need a lump sum of cash to settle accounts, so if you have any money in savings or investments that can be used that’s one alternative.
Also, have you gone through your current spending to see if there are things that can be cut, like cable TV, expensive cellphone plans, extracurricular activities, etc?
Another place you may raise some money is by selling off things in your home you no longer use or can afford. Many people have hundreds or thousands of dollars of unused items stashed in closets, attics or basements.
I don’t know all the details of your situation but hope this helps.
March 11th, 2009 at 6:08 pm
one question we received a court notice to appear in court for are 6 month past due account for 2400.00 and we offer the lawyers 1100.00 they said no do you have a chance with the judge?thanks mike
March 24th, 2009 at 2:26 pm
Mike,
That’s difficult for me to answer. It will depend upon the judge and other specifics of your financial situation, such as whether other debt is being discussed in the court appearance.
Francine
April 10th, 2009 at 7:01 pm
I have almost $40,000 in credit card debt and I can’t afford my minimum payments and still stay afloat without using the available credit each month so I would like to get out of this vicious cycle and settle my debt on these 4 credit cards but I am current on all my payments. Should I miss a payment before calling my credit card company? When is the ideal time to contact a credit card company to settle a debt?
April 22nd, 2009 at 8:59 am
Debt settlement companies usually won’t talk about settlements until you’re about 90 days late. But think long and hard about skipping payments. Make sure you’ve done everything possible to cut your expenses so you can divert more money to paying necessary bills. Get rid of extra phone services, newspapers, whatever you can think before going that route.
June 22nd, 2009 at 3:33 am
Jessica, one way of lowering is your payments is telling your credit cards you want to close your card with them, most companies will immediately offer you a lower interest rate Another solution is to take out a loan to eliminate all those high interest rates and make it one payment and get it paid off A loan is much easier to pay off then a credit card, and almost any loan allows you to pay more if you have extra cash available to pay it off quicker But just remember when you get that loan, stay away from those cards and focus on your debt One for emergencies which you leave in your freezer is acceptable You have to thaw out your CC before you can use it, that way no impulse buying, hope this helps, talk to a loan officer , a good loan officer will try to help your financial situation work for you DONT MISS PAYMENTS, YOU WILL REGRET IT
November 22nd, 2009 at 2:16 pm
A few years ago the gas and light company in my area took me to court for unpaid utilities and garnished my wages. In the papers from the court, it stated they were to only garnish my wages for 13 weeks… which they didn’t. They garnished my paycheck for a few years. I moved into a new apartment, and when I called the company to see if I could get the utilities put in my name they said I didn’t owe anything. To make a long story short, I only lived in the apartment for 4 months and by the time I moved out and received my last bill they claimed I owed another $3,000. When I called to discuss the matter with them, they claimed that I still owed on the garnishment so they tagged on my current utility bill to my former one. Is there any way I can get this situation fixed without resorting to legal help?
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