Tips On How You Can NEGOTIATE With Your Lenders And Debt Collectors

Published by moneyqlip

Getting calls from your lenders and debt collectors is probably one of the most annoying experiences. I can say this because I personally experienced it once with a medical bill in college about 5-6 years ago. In general, our first instinct is to forward their calls and to completely ignore. I did it…I used to think maybe if I don’t answer, the problem doesn’t exist. Well I was completely wrong and that explains why my credit score was in the low 600s at the time.

If your lenders are calling you to collect money that you owe, pick up the phone and talk to them. If debt collectors are calling you to collect what you owe, by this point just pick up the phone and talk to them because it has already been reported to your credit report.

Now, before I continue, please be aware that you have credit rights and the lenders and debt collectors cannot abuse these consumer protections. Please learn about them and be aware…it’s for your own good.

So, why am I encouraging you to pick up the phone and to talk to them? You have the right and the ability to negotiate with them about the payment terms and, in some cases, you may even settle and reduce the balances that you owe!

Here are my tips

Before you speak to your lenders and debt collectors, remain calm, collective, stay focused and be prepared.

Be organized. Organize all of your paperwork related to the debts that you owe and arrange them by secured and unsecured OR by debt balances and interest rates. Then, give them a priority ranking. If you’re not sure how to prioritize them, check out a related post I wrote about secured/unsecured debts and the snowball method/high interest rate method. 

Be honest. Tell your lenders and the debt collectors how much YOU can afford. Don’t let these debt payments come at the expense of your necessities, such as your rent/mortgage, auto loan, and other essential living expenses. But, make sure you’re honest with them.

  • Ask for longer payment terms
  • Ask for forgiving late fees and other fees not associated to the actual principal of the money you borrowed

If you’re going to settle with them, be aware that this new settlement will reflect on your credit report and it’s not the most attractive comment you’ll have next to a closed account that was once delinquent. Don’t worry, you will live and be able to move on.

Keep records. Please don’t overlook this one and keep records of everything. When I say this, I am referring to the conversations you have with the lenders and debt collectors. For instance, keep notes of who you spoke with, the days and times you spoke with them, and the details of the conversations. Once you have negotiated new terms, ask them to send you the new terms in writing. This will serve as proof of their agreement with you. Why do all of this? If things don’t go so smoothly and a lawsuit is in play, these documents will serve you well. OR, maybe they aren’t reporting the information accurately to the credit bureaus, which leads me to my next point…

Check your credit report. This is going to be your way of holding them accountable to reporting the information accurately. Look for the new payment terms, payment history, on-time payments, and that the balances are accurate. Just make sure you hold up your end of the bargain too. Check out this related post from Vania about using Credit Karma to track your credit report! 

Before I end here, I can’t write this post without providing some other great resources available to you. So, if you need more information and want to seek professional advice and services, visit these websites:

National Foundation for Credit Counseling

Consumer Finance Protection Bureau