Credit is when someone loans you money with the expectation that you’ll pay it back, and with interest. That’s an agreement that you make with your creditor when you sign up. The end goal for a creditor is to get paid. For the most part they’ll take full or partial payments depending on your situation. You can negotiate with your creditors, but it’s important to know the proper steps to do so.
Communicate your situation with your creditor as soon as possible, if you are unable to make a payment. Most creditors will allow you to skip a payment or make an interest only payment. If you wait three months without making payments, you’ve lost your negotiating power. Creditors are not able to make these arrangements with accounts that are already in the red.
2. Proper Planning
Create a payment schedule that is realistic to payments that you can actually make. Creditors want to know how much you can pay and when. Consider your income sources, your expenses, and only agree to payments that you can make. A broken “promise to pay” shows the creditor you are not willing to work with them.
3. Divide and Conquer
If you know you get paid every two weeks, when negotiating with creditors, offer to make a payment to them every two weeks. They may not accept a $100 monthly payment, but will accept an alternative of $50 every two weeks. This increased frequency in payments show that you are invested in paying off your debt.
4. Be Proactive
Don’t let the creditor make the first point of contact. Reach out to them. Advise them that you are making a payment, even if it’s just a small payment. Once you’ve made the payment, follow up with them to ensure the money was received. This is also a good time to let them know when the next payment will be made. This overs you for when a creditor calls because there will already be a note on your file with your next projected payment date. This should stop the creditor from calling you.
5. Documentation is Your Friend
When speaking with a creditor, always, always, always document who you spoke with. Always ask for the person’s name at the start of the conversation and write it down. List the date, time, name of the person your speaking with, and anything that you may have agreed upon. Creditors and collection agencies have a habit of forgetting what you agreed to and end up asking for a bit more. If you agree to a settlement, ask the creditor to send you a copy of that agreement in writing. Debts may often get passed to another collector and you will need proof on your end of any agreements that were made.
The steps outlined above are a great solution to coming to an agreement with your creditors on your own. Once your payments are back on schedule – or on a new schedule – start identifying situations that may lead you into debt again in the future. Most are unexpected, but it’s important to prepare yourself for the unexpected when dealing with your finances.