While creditors would like you to think otherwise, the fact of the matter is that any debt that you have is negotiable. What’s more, regardless of the amount, 90 percent of creditors are going to be willing to take a lump sum now over a promise to pay at a later date. When it comes to negotiating large amounts, the following tips may make it easier to come out ahead.
Have a story mid stick with it: The person you are dealing with isn’t going to be interested in your life story, but they will need to know who you are unable to pay in full right now. This means you are going to want to have a story that outlines your hardships and explains what you are doing to get back on track. You will want to distill that story down to the most important points and never waver from it throughout the negotiation process.
One particularly useful strategy is mentioning that, due to financial hardship, you will soon be meeting with a lawyer who specializes in bankruptcy. This will almost always make creditors more willing to strike a deal as if you file for bankruptcy there is a chance that they will get nothing.
Stay calm: It is important to keep in mind that, no matter what the creditor says, you have the upper hand as the debt you have is leverage over them. Stick to this fact and, no matter what they say, do your best to avoid losing your temper. If you make a scene or cause drama then the creditor will know they are getting to you and will be less willing to make a deal. If you feel yourself losing it, simply tell them that you will call them back and end the call as quickly as possible. If you find the creditor’s behavior hard to stomach, simply tell them you are recording the conversation which will put them on their best, and most professional, behavior.
Always ask questions: If the creditor threatens you with a lawsuit or with the loss of property, above all else it is important that you don’t let these threats frighten you into making a poor decision. Instead, it is important to ask questions as this will often reveal if the creditor is bluffing or not. For example, if they threaten you with a lawsuit, simply ask when you can expect to be notified of it. Keep notes of these threats as they are often times illegal as creditors are strictly limited as to how they can approach debt, specifically to protect consumers.
Likewise, you are going to want to take notes every time you speak with a creditor including the name of the person you spoke with, the date and the things that were discussed, especially threats. There is typically a statute of limitations as to how long the creditor has to collect on a debt, which varies by region, and they will likely become irritated as that time period approaches.
Avoid agreeing to a payment plan: If you agree to a payment plan you will always end up paying more in the long run then if you manage to scrape together a lump sum payment. Depending on the amount you owe, even as little as 30 percent might be enough to satisfy the creditor assuming it is getting close to the end of the time-frame they have to collect on the debt and you have stuck to your
story about financial hardship and bankruptcy. Never be afraid to offer a low-ball number, the worst that can happen is that they refuse to take it. If you do end up agreeing to a payment plan make sure you go over your expenses with a fine-tooth comb and ensure you can afford to make the payment every month to avoid finding yourself back in the same situation.
Try and deal with creditors: If you know you are going to be unable to make payments on a debt you have accrued, do your best to come to an agreement with the creditor directly, before the debt is sent to collections. The creditor is always going to be easier to negotiate with than a third-party debt collection service.