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negotiate with creditors
3 years ago 2 comments

How to Negotiate with Creditors


If you find yourself in a position where you are having trouble paying your bills, you might feel the situation is hopeless and there is nothing you can do, but that is not necessarily true. Oftentimes, you can negotiate with creditors to receive better terms to pay off your debt. You might be surprised just how willing some creditors will be to receive a portion of what you own instead of the full amount. You just need to know how to approach them.

Negotiating with Creditors

If possible, and you want to negotiate with creditors instead of debt consolidation or debt collection, be sure the debt has not already been sent to collections. If it has, you won’t have much of a choice. Either way, there are a few things you should know before you try and lower your debt.

1.) Use the ‘B word’, Bankruptcy – Even if you are not planning on filing for bankruptcy or it is the very last resort way down the line, your creditors don’t need to know that. If you tell them that you are considering filing for bankruptcy in the near future, they will often be much more willing to work with you now.

Your creditors know that any unsecured debt will be written off in a bankruptcy, so if you do file, they will get nothing. For them, it makes a lot more sense to get a percentage of what you owe them today than nothing tomorrow.

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2.) Try to get 50 percent of your debt written off – Once you start to negotiate with creditors, you will find that many will take as little as 30 percent of the balance due to write off your debt. Some will take 50 percent. Either way, to obtain this lower percentage you need to start lower with your negotiation position. Offer 15 percent, which they will refuse, but then you and they can negotiate upwards and settle somewhere between the 30 and 50 percent area. In the end, you will both be happy.

3.) Make sure you have cash available – If you try to negotiate with creditors when you have no way to pay them anything, they will be less willing to work with you. On the other hand, if you have the cash available to give them a lump sum of money, chances are they will be willing to make you a better offer. It stands to reason that your creditors would rather take what they can get today than wait until tomorrow and possibly not get anything.

At the very least, you should be able to make payments starting immediately, but this should be plan b as you won’t get as good of a deal from your creditors.

With a little planning ahead, and being proactive when speaking to your creditors, you will find that they can be reasonable. Do your best to lead the conversation and don’t allow them to intimidate you. Stand your ground and make your offer and go from there. If you do that, you should be able to negotiate with creditors and get your debts paid off and under control.

This information was brought to you by BetterLoanChoice

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  1. Cynthia Stewart

    Once you negotiate a settlement on a card like that, does the company usually then close the card? Either way, how does that show up on your credit and does it have a negative effect?

    1. Kevin Lateko Post author

      Hi Cynthia —

      Good question. Here is a good explanation from our friends at Experian:

      When you settle an account, it means that the creditor is agreeing to accept a payoff amount that is less than the amount originally owed. Because the creditor is taking a loss, a status of settled is considered potentially negative, though it is better than if the debt was not paid at all.

      Let us know if you have any additional questions and thank you for visiting

      -BetterLoanChoice Team

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