Negotiating debts is not as difficult as you think. Admittedly, it can be an intimidating task. But it is not impossible to do – even on your own.
With everything that is going on with the pandemic and the recession, you might find yourself needing to negotiate your own debts. After the Great Recession, we all learned that having debts while in a recession is not a good combination. It will be harder for you to survive the financial crisis. And if you can survive it without losing all your assets, it will still be hard to recover.
According to reports, Americans are already having a hard time covering their monthly bills and other expenses. Almost 8 out of 10 Americans have debts and some even admitted that they have too much of it.
If you think you have a lot of debts, you need to do something about it. We don’t know how long the pandemic will last. We also have no idea how it can make the recession worse. Because if you listen to some economists and financial experts, they have begun to call it a depression. It’s no longer a recession but something that is much worse. If this is all true, then you need to start doing something to secure your finances. And negotiating debts may be one of the things that you have to do.
3 plans you can choose from when negotiating debts
If you need a boost of confidence, you should know that credit card companies are probably getting ready for the recession as well. In fact, some credit card companies already have programs in place for borrowers who have been affected by the pandemic. These companies know and understand that people will be having a hard time with their debt payments.
But before you start negotiating all your debts, you need to have a plan of attack. You need to know your options because it will help you create a strategy. Remember, what you are entering is a negotiation. That means you need to be prepared. You have to know what you are doing so you know how to talk to your creditors or lenders. It will increase the chances that you will win the negotiations.
Here are 3 plans that you can use to start negotiating debts.
Pay your debt in a lump sum
Do you have a huge amount of money that you can use? Maybe you have some inheritance money that you are not using at the moment? Or you have been very generous with your retirement fund and you can afford to borrow some of your money. You can probably use that to settle your debts.
Some people might think twice about using this to pay off debt because we need to preserve whatever cash we have at the moment. But the thing is, you are not using this money to pay your whole debt. You will use it to pay only a portion of what you owe. This is where your skills in negotiating debts will be used. You will offer this lump sum amount to pay your debt. Anything that it will not cover will be forgiven by the creditor or lender.
This strategy is a great idea if you still have enough emergency funds to help tide you over during the financial crisis. It is also ideal if the amount you will pay towards your debts will not deplete your retirement funds or your inheritance money, etc.
Seek an arrangement
If you are not lucky enough to have inheritance money lying around, you can still negotiate your debts by asking for a workout arrangement. Under this arrangement, you will be asking the bank to lower the amount that you have to pay. Oftentimes, the creditor or lender will lower the interest rate and waive certain fees like the late penalties or over-limit charges. If you have existing fees, you can ask them to waive that.
One thing that you need to know about this strategy is that you might not be able to use your credit card. Make sure that you clarify the details with the bank while you are negotiating debts. You want to completely understand how this will affect your debt situation.
Opt for forbearance programs
You also have the option to enter the forbearance program of your creditor or lender. This is the ideal strategy if you think that your financial problem is only temporary. For instance, you know that your job is secure and that you will resume getting enough income in a couple of months.
A forbearance program means you can ask the creditor or lender to lower the interest rate over a specific period. They can also remove the late penalty fees while you are under the forbearance program. If things are really bad, you may want to ask them to let you skip payments. Or at least allow you to pay a really low amount. This will help make your debts feel less of a burden. Not only that, but you can also use your limited funds on other things.
What happens after choosing a plan for negotiating debts
Once you have chosen the right plan that will make negotiating debts easier, what’s next?
You need to start dealing with your credit issues. You have to act on the plans that you have chosen. How do you begin to solve your debt situation?
Start calling your creditors and lenders
You should create a list of all your debts and start calling your creditors and lenders. Give yourself enough time to talk to each and every one of them. And you have to be prepared to make multiple calls. It is possible that the first time you call, you will be turned down. This is okay. You have to be persistent about it.
You can list the calls you will make according to priority. Or according to who among the creditors and lenders will agree to your proposals. If you succeed in negotiating debts with the first creditor, it will give you the confidence to negotiate with the rest on your list.
When haggling, stick to what you can afford
While you are negotiating debts, you need to stick to your plan. To be specific, you need to stick to what you can afford. Sometimes, the negotiation process will make you feel frustrated. If that happens, don’t give up. You need to keep on pushing forward. If you have to, rest. Don’t make calls for one day. Do research to find out tips on how to negotiate your debts. Then do it again the next day.
All your efforts will be for nothing if you give in to what the creditors or lenders want even if you can’t afford it. Never agree to something that you cannot commit to.
In case you think that negotiating debts is hard, that’s okay. You can get the help of a professional. You have the option to use a debt settlement company. There are companies that will assign debt experts to work with you and negotiate debts on your behalf. You can also check if debt management is the right option for you. These two options rely on debt negotiation to make your monthly payments more affordable. Once it’s affordable, it will be easier for you to pay off your debts.