How to Negotiate With Collection Agencies, Creditors and Debt Collectors

4avg.rating 14 votes.


how to negotiate with collection agenciesIf you’ve been getting nagging phone calls about paying past due bills, then you should read these tips for how to negotiate with collection agencies, creditors, and debt collectors. You’ll learn how to prepare yourself, which debts to negotiate first, and proven negotiating rules. This information will help you to become a stronger and more confident negotiator.

Prepare to Negotiate the Right Way

The first rule of negotiating to to prepare for the battle. This includes the following steps:

– Gather and organize all of your financial information and put it in a place where it can be easily accessed.
– Create a household budget that shows all of your income and how it’s being spent.
– List all of your debts and highlight the ones you want to negotiate with creditors.
– List all your assets and their estimated values.

Choose Which Debts to Negotiate

When deciding which debts to negotiate, prioritize them in order of importance. For example, if you’re behind in your car payment or home mortgage, the creditors can take these things away from you. That’s because these items are secured debts, whereas credit card debt is unsecured.

But other important debts include rent, utilities, and any money that is owed to the government.

So when you evaluate your debts, pay attention to the potential consequences of not paying them. Put the ones that can do the most harm at the top of your negotiating list.

Determine What You Want Out of Your Negotiations

Once you have your debts listed, determine what you’ll ask for when you talk to the creditor, collection agency or debt collector. Of course, it would be nice if the entire debt went away, but that’s probably not going to happen. But there could be negotiating room to achieve the following:

– Reduce your payments going forward
– Lower interest rates
– Eliminate or lower fees
– Enter into a restructured payment plan
– Agreement to pay the outstanding balance in full at a significant discount

Know Your Reasons for Debt Relief

Before negotiating with a creditor, debt collector, or collection agency, you should get your story straight. Know what you’re going to say and what changes you’re making to live up to any agreement that is reached. You may also want to read our other article on How to Talk to Debt Collectors and Gain the Upper Hand to get even more tips related to this area.

Keep in mind that an honest negotiation is not meant to be a one-sided event. So you have to do things that will give the other party confidence in your future ability to pay. For example, maybe you can tell them that you’ve gotten a second job or implemented a strict household budget.

Of course, if you’re on a serious collision course with bankruptcy, let them know that as well.

Follow These Four Proven Negotiating Rules

1. Understand who has the upperhand – If you’re drowning in debt, there’s no doubt that the creditor or collection agency has the upperhand in any negotiation. This is especially true if they can foreclose on your home or repossess your car.

But since they really want their money, and don’t want you to file for bankruptcy, most of them should be willing to listen.

2. Keep your cool – If you enter into a negotiation with a nasty attitude and spewing verbal venom, you can rest assured that you won’t get what you want. So if you’re a hot head or get pissed off easily, recognize this about yourself before negotiating, and commit to staying calm. Have a plan for what you will do if you begin to feel angry.

3. Know your limit – In your pre-negotiation homework, you should have identified the most desired outcome from your negotiations. But you should also have an idea of the minimum that you will accept.

If you have these two scenario spelled out in your mind, or on paper, if necessary, you won’t find yourself getting locked into a deal that you can’t afford or that stinks.

4. Don’t reveal everything too soon – Remember that it’s the art of negotiating and not the art of spilling your guts. So don’t turn over all your financial records and details.

When you make an offer, start with your ideal scenario and sell it hard. Then, listen to the creditor or debt collector and ask them to make a counter offer.

If the creditor or debt collector pushes back, it’s fine to give a little ground if they are coming closer to what you want. So continue the give and take until you’re both on the same page.

Also, if you can come up with creative options such as offering an asset as collateral, that could help. But don’t take this too far. Bring this up only if the deal is on the cusp of success, but there’s a final snag that is preventing the other party from saying yes.

So now you know how to negotiate with collection agencies, creditors and debt collectors. You have to get organized and prepare yourself, decide what you want to happen, be clear on why you want debt relief, and follow proven negotiating rules. You may not get everything you want, but you could get more than you every imagined.