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How To Negotiate With Creditors

Four Steps To Take Before Contact With A Creditor

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Step 1. Determine your objective about each creditor.

If you haven't already, read: How To Deal With A Financial Crunch.

Start with the creditors that are most important to you.

Create a realistic goal. Most companies are not going to accept a $1 payment per month on a $5,000 balance

Step 2. Think about what to say to convince the creditor to say "yes."

Use your budget to help negotiate. Your budget will let you tell creditors how much you can reasonably afford -- and what you can't afford.

Think about how long you've done business with each creditor and how your history has been with them. The longer the history, and the better the relationship, the more likely you'll get favorable treatment.

Decide how much you're willing to tell the creditor about your health condition and the consequences. You may owe money to a large multi-national corporation, but you will be speaking with another human being.

Do some homework. For instance, before you ask for a reduction in the rate on your credit card, check to determine current credit card rates. See offsite link, offsite link and offsite link

Step 3. Think about how to tell your story and make your request.

  • Be honest and open. A large part of a creditor's willingness to work with you will be whether the creditor believes you will honor your agreement.
  • Be polite. Creditors are used to dealing with angry, defensive people. You are more likely to get what you want if you are courteous.
  • Be flexible.
  • Don't be pressured into paying more than you can afford -- or favoring one creditor over another.
  • Don't let the conversation get to you. Customer service people are likely to be pleasant. If you get a person in the collection's department, they may not be as pleasant. Remember these people hear a lot of untruths from a lot of people.
  • Avoid words like "in all honesty" or "to tell the truth." They may sound well meaning, but they can also indicate you're not being honest the rest of the time.

Be near a fax machine in case you need to send papers to the creditor.

Step 4. Be prepared for the unexpected.

For example.

  • "I can't put you through to my supervisor (the decision maker.) There is no one here." -- There doesn't seem to be such a thing as a call center without a supervisor. If nothing else, they're there to make sure the people are actually working.
  • "We don't do that. It's against the rules." Rules are made by people, and can be changed by people. You just have to speak with someone with enough authority to do it. An easy response: "Even if it means losing me? I received an offer in the mail for no interest for __ days."
  • Don't be surprised if the creditor asks to know your complete financial situation before it will accept changes -- particularly if you are asking for a big change such as a major reduction in the amount of the debt.

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