How to Negotiate with Debt Collectors
by: Michael Creditfirm.
Getting behind on your bills can be suffocating, but getting back out of debt and paying off your creditors may seem like an insurmountable task.
Negotiating with creditors doesn’t have to be as stressful as it may seem.
Follow these 5 rules when setting your debt.
1. Create an Action Plan
Before you even begin contacting your creditors and negotiating a settlement, you must have a clear and concise plan of how you intend to repay the debt (lump sum or payment plan). Gather up all of your debt and figure out how much available money you have each month to pay toward your debt. Then divide that total amount into each individual account allocating a specific maximum amount you can afford to pay for each debt monthly. This will help you understand the limits of what you can and cannot afford to pay.
2. Ask for a Lower Interest Rate
Many people don’t know this, but collection agencies are allowed to charge you interest on the debt which they hold. This interest rate may not seem like much but can quickly double or even triple the total amount due in a very short period of time. If you opt for a debt repayment play, ask your creditors to reduce or even eliminate their interest rate, thereby saving you money and allowing you to become debt free faster.
3. Low-Ball Offer
Start the negotiating process off with a lowball offer you know they probably wont take. If you have $2,000 in debt and the debt collector wants $1600, offer $100 to settle the account in full. Although the collection agency probably won’t bite on that offer, they will be more willing to reduce their settlement offer considering the huge gap.
3. Mention Bankruptcy
While negotiating for the best settlement option possible, be sure to mention Bankruptcy to the debt collectors as one of your options if you cannot workout a deal with them. Collection agencies paid money for your debt, and considering no one likes losing money, they may be more likely to take a lower offer from you instead of not getting anything at all.
5. Say No
Rejecting the collection agencies offers and hanging up a few times will dissipate any sense of urgency on your part and make the collection agency take the first step toward reducing the settlement amount. Saying no will give you the upper hand in the negotiating process and put you in control of the amount of money you settle the account for.
Tell the collection agency that you only have a certain amount of money toward paying off your debt. (Don’t tell them what that amount is.) But do tell them that if you cannot work out a deal with them, that you appreciate their time and help, but you allocated a certain amount of money toward paying off your collections, and if they can’t accept your offer, you will contact one of your other collection accounts and offer them the money.
Negotiating with collection agencies may be challenging, but if done correctly, it is possible to save a lot of money. Good Luck!
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