Debt can be a really challenging reality for many Canadians. While there are plenty of bad credit and debt relief strategies that can help individuals take steps towards improving their financial situation, in other cases, this may not be enough.
In fact, in order to start getting rid of some of your debt, it may be necessary to contact your creditors and look into having them provide assistance in this area. Specifically, here you may want to try and negotiate the repayment of your various credit accounts.
At his point perhaps you are also wondering whether or not this is even a worthwhile course of action, especially if your finances have become somewhat out of your control.
To find out more, read on to learn more about whether or not it is worthwhile to negotiate with creditors as well as how to go about it.
In the beginning, it is important to keep in mind that creditors are typically well-versed in this process and therefore, as a borrower you will need to be prepared and have your negotiation ‘hat’ on. With that being said, it is definitely not unheard of to successfully negotiate with your creditors, however there are certain steps you can take to improve your chances of arriving at a positive outcome. In order to help your cause, here are a few tips to prepare you for negotiating with creditors.
Identify your Current Expenses (Your Normal Bills vs. Credit Expenses)
First of all, you need to begin by taking a close look at your finances. How much money do you need each month to stay ‘afloat’ and continue to keep up with your normal expenses. This area relates to the first point you can express to your creditor to negotiate your case.
For example, here you will tell your creditor that in order to keep paying these regular bills off, you can not also continue to pay off all of your credit in full, without going into further debt.
Propose a Payment Plan (How much you can pay back vs. How much you need to get out of paying)
Next you should also determine how much you can afford to pay back versus how much you think the creditor will realistically let you out of paying. While your repayment plan may vary depending on your financial predicament, a general guideline for your payment proposal is to offer to pay 50% of the total balance or bill your owe.
This is an important piece of information before entering into these negotiations, as it is unlikely that creditors will let any borrower out of more than 50% of their balance. Therefore, when you call them and propose this payment plan, this helps to ensure it is a realistic arrangement and they won’t turn your down on the spot.
In addition to the above-mentioned proposal, your repayment plan can also include a payment schedule. This is also how you convey your willingness to pay back the money you owe based on specific schedule, for example, either in the form of a lump sum or an instalment plan. Ultimately, this shows you are making an effort and not trying to get away without offering to pay at all.
Additional Points to Mention During Negotiations
As apart of your negotiations, you can also inquire about having creditors remove some,if not all of the negative comments on your credit report. Here you can request that these details be removed after you have paid off the agreed-upon amount of debt. In order to improve you your credit score and set yourself up for more financial success moving forward, this is another key component of the negotiation process.
In the event however, you are finding it challenging to get your creditor to agree to your proposal, you may then want to mention the word ‘ bankruptcy’. If a creditor hears that filing for bankruptcy may be your only option, then they know that they won’t see any of the outstanding credit you owe. Therefore, they are likely to be more open to having you pay back at least 50% versus turning your down completely.
Finally, if you and your creditor can come to an agreement, then you also want to be sure to get this agreement in writing and to have them send you a hard copy of all aspects of this plan. Ultimately, this can help avoid any confusion or even legal ramifications down the road.
To recap, in order to improve your chances of arriving at a positive financial arrangement, you will want to devise a plan that clearly proposes the amount you can pay back as well as when you can pay it back …. thus, illustrating to your creditor that you are committed to paying back a reasonable portion of your debt.
In the end, being prepared and presenting a clear and organized plan for responsibly paying back as much of your debt as possible is a key part of any successful credit negotiation.