It’s hard to attain certain things in life without accruing some form of debt, but data from Comet shows it’s a little too common in America to owe money. Nearly 80 percent of Americans have some kind of debt, and while mortgages and student loans lead the way in terms of overall balance, it’s unsecured debts like credit cards and medical bills that give debtors the most trouble.
However, unsecured debts, since they’re not tied to anything physical, are also the most flexible to negotiate with creditors.
Here are five best practices for negotiating with creditors:
Make Sure You’re Dealing with an Actual Creditor (Not a Collector)
Things can move quickly when you first make contact with a creditor, so it’s worth preparing ahead of time to ensure the process goes smoothly. Before you negotiate, know whether you’re talking to a creditor or debt collector; it’s a matter of understanding your rights.
Debt collectors will be the ones that reach out to you. They’re bound by the Fair Debt Collection Practices Act (FDCPA), which protects against abusive, deceptive and otherwise unfair practices during the collection process. If your debt hasn’t been sent to collections, you’ll want to set up a time to speak to your creditor about reducing your deficit.
Stay Calm When Speaking with Creditors
Don’t feel intimidated during this step. Your creditor won’t offer anything you don’t ask for. But the way you communicate and carry yourself will go a long way to getting your way. Even though you’re in trouble financially, you still have bargaining chips: your behavior. Communicate the reason for your repayment difficulty respectfully and transparently so the creditor will be more willing to sympathize with your situation. It also helps to exude a strong desire to pay off as much as you can to make things right.
You may think creditors are purely interested in numbers but they deal with a lot of credit card debt, and they don’t view all debtor circumstances equally. If you’re not confident in your ability to maintain composure and articulate your situation, reviewers of Freedom Debt Relief describe a streamlined and successful experience having their debts settled without having to be involved directly. Settlement companies do charge a fee if a debtor agrees to pay a lowered debt but beware of any services that try to get payment upfront.
Always Take Notes
If you decide to negotiate directly with your creditors, keep a log of every conversation. Things might be making sense during the conversation, but you’ll want an accurate record of the negotiation on paper so you’re always clear on where discussions stand. This is another benefit to handing over the keys to a settlement company and professional debt negotiators.
Being in debt certainly feels powerless, so it’s no surprise that many debtors accept what’s in front of them without questioning anything. If a creditor tries to threaten you with a lawsuit, ask when they plan to serve it and when any consequences should be felt.
If they’re saying they’ll send your debt to collections, ask them how much they’d make off that versus lowering your balance by a certain margin. Asking questions not only gleans more details from the creditor, but it also demonstrates that you’re engaged in dealing with the matter and therefore more likely to pay back some of your debt.
Get All Agreements in Writing
Document every detail related to your negotiation. Make copies of your hand-written notes from phone calls. Archive and print every piece of email communication. And please, get any actual agreements you and your creditor come to in writing. Referencing a past conversation, even if you have specifics like call dates and notes, pales in comparison to a formal agreement with the creditor’s signature.
You should have a collection with all this documentation before you pay money based on a new agreement. New terms that aren’t tied to a formal agreement can change at any time, leaving you in a precarious situation. Unless you want to potentially have your debt creep up at you down the line, only take action with formal agreements in place.
Keep in mind that these are only best practices for dealing with actual creditors. Dealing with debt collectors and collection agencies is a whole other affair. Settling your debts before they reach collections should be the goal. Following the best practices above will help ensure that happens.