How to Negotiate with Your Creditors

For borrowers who have found themselves in financial difficulties, thus not being able to pay their loans within the prescribed schedule as a result, the thought of dealing with their creditors to settle these loans can be a shuddering one, if not dreadful. 

That is understandable, given creditors, by default, tend to be “demanding” to borrowers with regards to unpaid credit. At times, they would threaten defaulting clients with possible lawsuits if the loan has not been repaid.

However, there is a way for struggling borrowers to fulfill their obligations to creditors without lawsuits or causing further financial strain. In fact, creditors are open in finding ways to settle with delinquent borrowers. The key here is through negotiation.

Knowing your rights 

Before you initiate negotiations with the licensed moneylender about the unpaid loan, it is important to know and understand your rights. Some creditors may ignore the existing laws on debt collection and related matters. And they would not hesitate doing so especially if the borrower has shown to be not knowledgeable of these laws, leaving you financially and mentally stressed.

Knowing your rights as a borrower and a consumer will help you in negotiating a fair deal with regards to your credit and it will give you a position of strength that will not let be disadvantaged by unscrupulous creditors.

Communicating with the creditor

In talking to your creditor, maintain a professional tone. Even if the creditor may seem unpleasant and is being rude to you, be calm and a bit more positive, while at the same time showing strength in that you are not feeling intimidated even in the midst of possible “verbal threats” the creditor may speak about. 

Keep in mind that even in the midst of those “threats”, creditors are still willing to work with you in dealing with the matter if you show to them you have a positive but not intimidated attitude.  

Strategy

The first thing to keep in mind is that when you communicate with a creditor, let them know upfront what you can afford.  Go through your expenses and determine how much you can pay to settle the loan, either in full or in installments. 

Generally though, paying an immediate cash loan in full is cheaper since creditors will not impose interest. But even if you pay in installment, interest rates may be lower than what is regularly imposed, depending on the amount you are able to afford on a regular period.

With regards to payments, the general strategy is to pay as little as possible on the outstanding debt that you owe. From there, you can negotiate with the creditor until you get a repayment amount that is satisfactory to both parties.

It is important also to keep in mind that you make sure that your debt has not yet been sent over to the collections department. This will severely impact your credit rating.

Agreement

Once you and the creditor have agreed on the repayment amount and the method of repayment, it is imperative that what has been agreed upon will be put into writing and signed by both parties. This will ensure that the loan agreement will not be changed somewhere in the future and the terms will be fully guaranteed.

Of course, as a borrower, it is your duty to honor the agreement and abide by its strictly. You do not want to get yourself into a deeper and legal mess should you decide to go against it for some reason.

Once the loan has been fully settled, follow through with your creditor if that settlement has been reported already to the credit bureau. Such reports can help improve your credit rating, though not by much.

Closing thoughts

Negotiating with creditors is admittedly not a perfect solution. And depending on your situation, it may not be an applicable option. However, in many cases it is a viable way to help delinquent borrowers be free from their debt obligations.