How to Negotiate With Your Creditors

How to Negotiate With Your Creditors

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If you have significant debt and are finding it difficult to reduce your financial burden, then negotiating with your creditors can help you manage your finances better. An important aspect in any plan involving financial management is working to lower your interest rates or even possibly having some of your debt forgiven.

Assemble your credit statements. Financial documents such as your credit card and loan statements can be useful in helping you determine what you owe and how much interest you are being charged for each debt. Review your statements and come up with a plan to have your high interest rate credit cards reduced. (see The Wall Street Journal: Credit Woes Hit Home)

credit cardsFor example, if you are paying 21.9 percent for one credit card, you can save money monthly simply by having that rate reduced to a more manageable 12 percent. That lower interest rate means that less money is being paid out monthly to cover interest charges while a larger portion of your payment can be used toward the loan principle. You may be able to reduce the amount you pay on your debt every month while helping yourself get out of debt faster.

Contact your creditors. Each of your statements includes contact information outlining how to reach your creditors. Contact your creditors and ask that your interest rate be reduced. According to Brad Dakake, a consumer advocate with Massachusetts Public Interest Research Group, “There’s no incentive for them to lower your rate unless you call. The squeaky wheel gets the oil.”

Will you get the lower rate? That’s hard to say. But, you won’t get a lower rate unless you ask. You may be paying a higher rate because you were late making payments or you deemed as a higher credit risk. No matter, credit card companies will sometimes reduce your interest rate just because you asked.

What about loan forgiveness? Now for the tricky part: can you get your loan balance reduced or forgiven? If so, what will that mean when it comes to your personal credit?

A lender may write off your loan if you have no way of making payments. But that comes with a price: your credit will take a major hit which means that you’ll have this mark on your credit for many years to come. While you did not declare personal bankruptcy, some lenders will view this action similarly.

Your credit score will be reduced and you may find it difficult to obtain new financing, rent an apartment, buy a home, even get a job. Yes, even employers can check up on your credit to see if you are a responsible with your debt.

Planning Ahead

Finally, if you are deeply in debt, what got you there? Poor spending habits? Job loss or reduced income? Mortgage problems? Seeking the assistance of a qualified financial adviser such as a debt consolidation specialist can help you resolve these issues and put you back on the path to financial freedom. (see SmartMoney.com: 4 Ways to Help Shrink Your Debt)

Just make sure that the person you find has the skill sets you need (degree, licensing, references) and presents a plan that will repair your credit not destroy it.

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