Credit negotiation is not as complicated as you think. It feels intimidating, but it’s actually quite simple. You need to call the creditor or lender to ask them to give you better terms. Your goal is to have a new repayment plan that you can afford. A plan that will not feel like a burden to you. After all, if the payments will not cause a strain in your budget, you are more likely to complete the payments.
Sounds logical, right? Now you have to make the creditor and lender believe that it is also for their own benefit. You will call them, talk about your proposal and wait for them to approve. If they don’t, that’s okay. You can put the phone down and call another day. Keep on doing this until you get the terms that you can afford.
That is how simple credit negotiation really is. And based on everything that is happening around us, you may have to give your creditors or lenders a call in the near future.
Right now, we are facing a crisis that took the world by surprise. The coronavirus pandemic did not just threaten our physical health. It also threatens our economic health.
And what makes this situation worse is the fact that the world owes a record-breaking amount of debt. In the US alone, American households have accumulated $14.5 trillion worth of debts. This is a trillion and a half more than the debt that was owed in 2008, before the last recession.
That means this time around, it will be harder for everyone to recover.
4 important rules during credit negotiation
While things will be harder for debt-ridden Americans, we are not completely defenseless against the financial crisis that is upon us. Credit negotiation is an effective way to make your debt situation less of a burden.
You already know the basic process that you have to do. Now, you have to make sure that you know the rules that will help you be successful.
Understand the process of negotiating and your rights
The first rule is to get to know your options. There are many ways for you to approach credit negotiation. You need to understand the different strategies that you can use. Among your options include applying for forbearance, debt settlement, or debt management. These are only a few of the options that you have. You need to know what these options are so you know the best strategy to use based on your specific financial situation.
Once you have chosen your strategy, you need to understand it completely. If you try to negotiate without knowing anything, you will lose the discussion. You won’t be able to defend your proposal. So make sure you know the strategy so you can implement the process properly.
Apart from that, you need to know your rights. Because part of the negotiation process is to bluff. You can expect that the creditor or lender will try to bluff their way out of agreeing to your proposal. They can say that you will be jailed if you don’t pay your dues based on the original terms. But if you know your rights, you will know that they cannot jail you. If you are trying to negotiate your secured loans, there is nothing you can do if the lender decides to take your collateral. If you know these things, you will know how to negotiate so you are in the best position to win.
Know what you can afford
The second rule that you have to follow is to make sure you know what you can afford. You will be making a proposal to change your terms. You have to present another option to repay what you owe. If the suggested terms will come from you, it is expected that you can afford it. If the creditor or lender accepts your proposal and it turns out that you can’t afford the new payment terms, you just failed to deal with your credit problems.
So how do you do this? You take a look at your income and expenses. Re-arrange your budget plan so you have more extra money. Lower your expenses and see if you can increase your income. By doing this, you can increase the debt payment that you can offer during the negotiation process. The more you can offer, the higher the chance that they will agree to your proposal.
Just make sure that you will not stretch your budget too much. If you can only afford a certain amount, stick to that. Don’t forget that you have other expenses as well – and most of these are necessary for you to survive.
Be ready to haggle
The next rule involves your negotiating skills. This is a credit negotiation. You have to be prepared to haggle with the creditors and lenders. This is why you need to come prepared before you give them a call. You need to have a full understanding of your proposal and your rights. If you have that, then you shouldn’t worry at all.
When you make that phone call, go straight to the point. Tell the person you are talking to that you want to negotiate better terms for your debt. You can state the reason – like you are in the midst of a financial crisis. Once they acknowledge the purpose of the call, make sure you are talking to the right person. This person should have the authority to negotiate with you and accept the terms you are proposing.
As you are talking to the right person, offer a smaller amount than what you can afford. This will leave you room to negotiate. And if they make a counter-offer, don’t accept the first one. Keep negotiating – but don’t frustrate them either.
Put everything in writing
The last rule that you need to follow during credit negotiation is to put everything in writing. In our intent to make the debt situation better, we sometimes do things in haste. But this is wrong. You need to go through the process and you need to be thorough about it. You also have to protect yourself. For every conversation that you have agreed on something or made progress, write and email and send it to them. Make them acknowledge the receipt of that email. That way, you are sure that you both understood what was discussed. And when you have reached the final agreement, put it in writing too. Don’t send any payment until they have acknowledged that they accept the terms. This will ensure that they will stick to whatever was agreed upon. And that you will not be charged with any fees.
Tips when talking to creditors and lenders
Credit negotiation is something that you can do but you need to make sure that you will do it correctly. Apart from the rules mentioned, here are other things that you need to consider.
Prepare to make multiple calls
The first is to be prepared to make multiple calls. You should not settle with the first offer – unless they accepted your initial proposal. But if not, then keep haggling. Never agree on something that you know you cannot afford. Or an agreement that you know you will have problems committing to.
Be upfront and honest
It is also important, to be honest. If you filed for unemployment, reveal that. They might already be expecting it since more than 6.6.million people have applied for unemployment during the last week of March. If you are upfront and honest about everything, the creditor or lender may be more agreeable to your proposal.
This is why you have to put everything in writing. You will be making multiple calls. You have to make sure that you know where you left off during the last conversations. It is the best way for you to be consistent with what you will say. This will also make the creditors take you seriously.