Guide on how to negotiate with your creditors
Do you know that you can negotiate with your creditors?
Are you owing debts that are becoming too burdensome to you? Debts can be so burdensome that it begins to make one sleepless especially if you don’t have means of repaying the debts. Collection calls can be so irritating. Any time your phone rings, you are not sure who is on the other side of the phone. Even when the call is coming from a different angle, the thought that will first come to your mind is that, “that must be a call from the collection agent again”. Except you have instructed the collection agents that they should not call you at a particular time of the day, their calls can come when you need to concentrate on something, thereby destabilizing you. Collection calls do not mean that such calls are abusive. No! Mere saying “just to remind you that your payment is due” to you can change your mood immediately.
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So, if you are having trouble paying back your debts, you can actually negotiate with your creditors. The truth is that, some of them will be ready to listen to you. They don’t actually hate you. All they are after is how they can get their money back from you. If you can approach them with respect and good words, they will listen to you. So, the question is that, what should you negotiate with your creditors? What you should negotiate with your creditors will depend on your prevailing situations and circumstances. What applies to Creditor A may not apply to Creditor B. But the following will guide you on how you can softly negotiate with them.
What to negotiate with your creditors
Lower Interest Rate: One of the major reasons that people find it difficult to pay back their debts is as a result of the high interest rate they pay on the loans. It is not unlikely that creditors will charge you a very high interest rate if you have a bad credit. They believe that the risk of default for people with bad credit is high. What lenders usually do to compensate the risk is for them to charge high interest rate on such loans. You may not blame them for doing that. If you are having problem paying back your loans, it may mean that the creditors are actually right in the first place by charging high interest rate to compensate themselves for the risk of possible default. However if you consider that the reason you are unable to pay back your loans is as a result of the high interest rate, you can negotiate with your creditors to help you lower the interest rate on the loans. For this arrangement to work, you should be able to convince them that you are committed to paying back the loans promptly if they help you lower the interest rates. Also, it may not even mean that you are finding it difficult to pay back the loan. If you observe that your credit score has improved significantly from what it was when you obtained the loans, you can renegotiate for lower interest rates. If this does not work, you may want to refinance or consolidate the loans. However, you need to compare the cost involved with the savings you will make on the lower interest you will be paying before deciding on debts refinancing or debts consolidation.
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Accrued Interest Waiver: At times, the accrued interest on loan can be as much as the principal itself. If this happens, it means you will need to pay as much as twice the original amount you borrowed. This is crazy! If you find yourself in such position, you may ask your creditor s to help you waive part of the accrued interest. For instance, if you borrowed $5,000 and the accumulated interest on the loan has grown up to $5,000, you may ask the creditor to reduce the interest by half. This means that you will only need to pay the principal with the interest of $2,500 on the loan if your request is granted. This is not a bad deal as your creditor will still get 50% returns on the loan. This is better than losing the loan balance with the interest. This kind of arrangement may work if you are willing to pay the entire loan balance with the negotiated interest immediately or within a very short time
Waiver of Fees: Apart from the interest that you pay on your debts, you may have incurred other fees such as late payment fees and other penalties on the loans. When you miss payment, you may be charged late payment fee. Besides, the interest rate on the loan may be reviewed upward. All these add to your outstanding debts. If you are the type that have been paying your loan regularly, it should not be difficult for you to approach your creditor and explain to him why you missed your payment. It is possible that you were hospitalized when your payment was due. If you can prove your case, your creditor should be able to waive the late payment fee or any other penalty that he might have imposed on you.
Deferment: If you are temporarily cash crunched and you know that you will soon get over the situation, you may apply for deferment of your loan repayment. That is, you negotiate with your creditors that you want to postpone the repayment of your loans for few months. Unfortunately, interest will continue to accrue during the repayment period except in the case of subsidized direct federal student loans where government will help you pay all the interest that accrued during the deferment period. For unsubsidized direct federal student loans or other loans, you have the option of paying only the interest during the deferment period or you allow the interest to be capitalized as part of the principal. Nevertheless, you can still negotiate with your creditor either not to charge or lower interest during the deferment period.
Prepayment option without penalty: There are some loans with prepayment clause. Such clause may forbid you from prepaying your loan. Any attempt to prepay your loan will attract prepayment penalty. The penalty may be so much that it may even make sense to continue repaying your loans on a monthly basis. Paying back your loans on a monthly basis gives your creditors guaranteed interest income every month. Regardless of any prepayment clause, you can still negotiate with your creditors to allow you pay off the loan without paying penalty fee. It is possible that you want to relocate and you want to ensure that you liquidate all your debts. You creditors may be glad that you let them know about this. This can make them to be lenient on the prepayment penalty.
Debt reduction: I have seen this happened in few occasions when the debt amount that an individual was owing was too much for him to pay and the creditors helped slash the debt by certain percentage. Possibly, the debtors must have paid too much interest on the debt while the principal still remained. In such a situation, you can plead with your creditor to help you reduce the debt amount to a manageable level. For instance, a widow that is left with just little amount to sustain herself every month may easily enjoy debt reduction if she pleads her case with her creditors
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What to report to credit bureaus: If you make late payment, your creditors have the right to report to the credit bureaus. Late payment can last seven years on your credit report. The effect of this is that creditor may not be willing to extend new credit to you or else you will be charged high interest rates. Besides, history of late payment will also lower your credit score, although the effects will fade off over time as long as you continue to make prompt payments thereafter. After you have rectified your account, you can ask your creditor to help you remove the late payment from your credit file. Please note that your creditor is not under any obligation to do this for you. You are simply asking for favour. Therefore, you should know how to plead your case.