Negotiating With Creditors
There is no guarantee that creditors will work with you but it never hurts to try. However, the sooner you contact them when you realize there is a problem, the more they are apt to working with you. Don’t wait until you have missed 5 payments to contact your lender. Contact them if you will miss the first payment.
Your lender may not give you everything you ask for, however, they may make some concessions that will give you a little breathing room to help improve your finances.
Before contacting your lender to lower your interest rate and/or monthly payment, it is vital that you do some upfront planning first. You should first create a detailed list of your debts; decide what debt you want to negotiate and what you want to ask for. You also need to take a look at your budget to determine what type of payments you can handle.
If you don’t feel comfortable negotiating with your creditors, you may seek an attorney or CPA to handle it for you. Hopefully, you have a relationship with an attorney or CPA that will charge you very little money to accomplish this. Another option is to find a nonprofit credit counseling agency to help you. You can also ask a family or friend for help.
You should also list if the debt is secured or unsecured. If the debt is secure, list what asset was used to secure the debt (car, house, etc.). For your unsecured debt, list them from high interest rate to low interest rate.
Now next to each debt, record the new payment you would like for each lender to agree to. Then leave a space for the negotiated payment when you finally negotiate with the lender.
Remember to check against your budget to determine if your desired payment can be accomplished. It makes no sense to negotiate for a lower payment to then find out, that you still don’t’ have enough money to make the payments.
All debts are not created equal. Some debts are more important than others, regardless of interest rate or the amount of payment. Secured debts are high priority because creditors could end up taking your asset (collateral) used to back the loan. You should prepare to negotiate with your creditors the following debts first.
- Car loan
- Past due rent
- Court ordered child support
- Past due federal taxes
- Past due state taxes
- Federal student loans