How to Negotiate with your Loan Creditors?

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Successful negotiations can lead to easier conditions for you to pay off your debt. It could be through a more affordable fixed monthly payment, longer payment terms or a reduced account balance. This way, you might find yourself completely settling your debt.

For example, you owe $12 000, you could successfully negotiate a lump-sum payment of $6 000. It’s important to note that if you have multiple debts, you’ll need to negotiate with every single one of your creditors.

Some will not agree with you, and there is no guarantee that you’ll succeed in your attempts to negotiate. With this in mind, you might be considering debt settlement companies to do the settlement for you. But, doing so will result in 2-3 years of late fees and penalties that negatively impact your credit report.

These companies charge fees, and there are no guarantees the moneylenders will accept the negotiation. But, if you’re still considering debt settlement as an option, you might as well do it yourself. This will often result in a shorter time frame of trying to resolve your debts with no charge at all.

In this guide we’ll provide you the steps to negotiate with your creditors.

STEP 1: Contact the creditor or collection agency

If you’ve been behind payments for 3-5 months or more, it is most likely that the collectors will be calling you regularly in a persistent manner. In this case, if the collector is calling you, the first step is to tell the caller that you wish to settle the debt.

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If for some reason the creditor or collector is not the type to regularly call then it’s time for you to initiate contact. This is good. This means you’re the one who’s in control. Be decisive and confident, and expect to be treated well. Ask questions if something is unclear, and don’t agree to anything unless you see it in writing.

Maintain a positive atmosphere and be respectful as well. It’s easier to work with someone who’s pleasant and kind. This might increase your odds for debt settlement.  

STEP 2:  Start low

Negotiating means to come to an agreement on a compromise. Some creditors rather get paid a partial amount that not get paid at all, and you want to pay the smallest amount. In this case, both of you need to find a middle ground to settle your debt. Usually the amount would be 50% to 70% if the payment can be made immediately.

If you owe $12 000, you might be required to make a lump-sum payment of $6000. Make sure that the amount is something you are capable of settling. Start as low as possible, because if you start with a definite amount, the creditor might suggest a bigger amount way beyond what you can afford. Starting with a low amount increases chances of reaching the amount both of you are satisfied with.

STEP 3: Have a settlement agreement

A debt settlement agreement is a contract signed between the lending company and debtor after re-negotiating or compromising on a debt. This is beneficial because you can be protected if ever the creditor changes its mind and backout from your agreed amount.

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The creditor might urge you to pay the remaining amount once you’re done paying your lump sum. Make the settlement agreement in writing and hire an attorney if possible. It’s not required, but legally it is in your best interest to do so. The settlement agreement will keep both parties accountable.


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