When a person runs up a considerable debt with one or more creditors, it can often behoove him to attempt to negotiate with the lenders so that they agree to accept a payment less than the total amount owed. Borrowers can achieve greater success in these negotiations by following a few basic tips.
Know How Much You Can Pay
When negotiating for a lower payment, it's good to know how much you can afford to pay and insist on paying less than that. If you agree to pay more than you can afford, even if it's significantly less than you owe, odds are good that you'll have to take out another loan, thereby sending you back in a debt spiral. Know your price and let your creditors know it, too.
Keep It Impersonal
Most creditors whom you deal with have heard every story in the book about the circumstances that led you into debt. When negotiating, stick to hard facts: how much you owe and how much you're able to pay, including your current sources of income. The creditor may attempt to pressure you into agreeing to a bargain you don't want. Stay unemotional and don't let the creditor rush you into anything.
Consider an Attorney
Hiring attorneys can be expensive, with many charging several hundred dollars per hour. However, if you have the means to hire one and your debt is large enough that a few thousand dollars in legal costs is a relatively small expense, consider hiring a seasoned negotiator. Being represented by a person with expert skills in contract negotiation, and who knows the laws in your state, can more than pay for itself with the amount knocked off your debt.
Provide Evidence
When attempting to make an argument to a creditor, especially one regarding your ability to pay back a certain amount of the money, offer as much evidence as possible, particularly in the form of legally binding documents. For example, when attempting to convince a creditor to convert your debt into a long-term payment plan, present him with bank statements showing your savings, check stubs for a recent paycheck and any other record of your financial assets.
Watch Your Credit Score
If you negotiate a settlement with a creditor, the creditor may attempt to write off the difference between the amount paid and the amount originally owed. This can damage your credit score and will likely remain on your credit report for up to seven years. Insist that the company remove all damaging information from your credit report and mark the debt as "paid in full" rather than "paid in settlement."
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