Should you negotiate your debt situation with creditors?
When the debt burden keeps mounting, everything seems to go wrong. The situation can go worse further on events like job loss, medical emergency or a car accident. But before you lose all hopes and stop paying bills and let your credit tank, it’s better to take initiative to control your situation.
We often avoid negotiating our financial difficulties with our lenders. But it can always save you from dealing with the notorious collection agencies.
How to initiate negotiation
- Be preempt in contacting your lenders and let them know your problem. Some creditors, if not all, may empathize with your situation and agree to set up a convenient repayment schedule. Remember that they are more concerned about getting their money back.
- Settle with a lump sum amount if possible. However, the success of a settlement proposal would also depend upon factors like - how much you owe, who’s the creditor and such.
- Try to set up a payment plan if you can’t come up with lump sum amount for settlement. However, you may have to pay little more for the debt than you would have paid in a lump sum settlement.
Points to remember when negotiating with creditors
- Be committed to your plan: When you have decided to negotiate with the creditor, try to live up to your commitments as well, i.e. donit commit to an amount or plan that you can’t meet. If you have decided to settle with a lump sum amount, be prepared to come up with the money upon agreement.
- Ask for settlement proposal in writing: It’s always important to get promises written on papers and signed in ink. This precaution is necessary to restrict the creditors from following illegitimate means to collect the debt later on.
- Ask for ‘pay for delete’: Remember to ask the creditor to remove the negative information from the credit report after the debt is satisfied. The pay for delete request works more effectively with the creditors than collection agencies. Some creditor may agree even to remove the negative information from the credit report upon settlement.
It’s usually said that original creditors are easier to deal with than the collection agencies, as the later often violate collection laws. Also you can save yourself from being sued for the debt by being proactive. Your willingness to repay the debt would put the creditors at ease and they might not sue you for the money.








