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Negotiating with Creditors - Dos and Don'ts

Updated on October 24, 2015

Do you have problems making monthly payments on your credit cards? Is your debt too overwhelming to handle? Talk to your creditors. It might sound naïve, but many people have done it successfully, either by themselves or with outside help.

The power of negotiation is often underestimated. Many people choose to hide from their creditors rather than communicate with them. That is a big mistake. Negotiating with creditors is not an easy job, but it can be done. If you have a financial crisis, let your creditors know that. You may ask for a few months of reduced payments. You can tell them you cannot make any payments for a certain period of time but intend to resume your monthly payments as soon as your situation improves. You can try to settle your debt for less than the total amount you owe. And if you're lucky, you may be able to talk your creditors into withdrawing certain negative entries on your credit report. Before negotiating with creditors, keep these tips in mind.

DON'T ignore your debt

You may be able to hide from the creditor but not the debt. It will always be there, awaiting you to take responsibility. The longer you turn a blind eye on the issue, the more severely your credit will be ruined. Almost always, negotiating with your creditors is a wise strategy to adopt.

DO try to settle your debt with a lump sum if you can

This way you may be able to settle for less than the total debt you owe. When you have a lump sum to offer, most creditors tend to be more lenient.

DON'T get discouraged by your bad credit history

Even if you have been a less-than-perfect customer, don't assume you have no leverage to negotiate. You do. Most creditors would rather work with you than ignore you because they still want your money.

DO provide facts to the creditor

Many debtors may overstate their problems a bit to get sympathy. However, never make up a baloney excuse. Creditors may require you to submit evidence that you are genuinely unable to pay. Some reasonable causes of financial hardship that creditors usually take into account include a loss of job, pay cut, permanent or temporary disability, unexpected tax assessment and large medical bills.

DON'T fall for a phony compromise

Sometimes creditors may agree to do you a favor but also ask for something in return. For example, they may allow you to skip a few payments in exchange for a much higher interest rate at the end. Be very cautious with that. Weigh the loss and gain before signing any agreements.

DO get help from a lawyer if your debt is large and your initial attempt to negotiate with the creditor has failed

Sometimes when creditors learn that a lawyer is in the picture, they will be more enthusiastic to compromise and communicate with you, assuming you might file for bankruptcy otherwise.

DON'T let your lawyer decide on everything for you

Although your lawyer might be more knowledgeable than you are in terms of legal procedures, you are the one who has to tell him what you want done. Be very specific about it. Discuss with your lawyer what he will charge for each service to be provided, then let him know what you want and don't want, instead of letting him decide what is good for you. Sometimes a lawyer will do much more than what you need and send you a huge bill that can become your new financial burden.

DO ask the creditor to remove negative information from your credit report

This won't be easy, though it doesn't mean it's impossible. Creditors do not like to withdraw reporting, but sometimes they may be convinced to do so, especially in exchange for a full payment. If you have missed a couple payments because of an unfortunate circumstance (you were hospitalized, your ex-spouse failed to give you the alimony, etc), explain that to your creditor. Don't be afraid to be pushy. If your request is turned down, play the classic trick; ask to speak to a supervisor. It's also okay to call back a few days later and bring up the matter again. Some successful negotiations take weeks. It doesn't have to end with only one phone call; write a letter or send an email to your creditor. Just be persistent; that's one of the must-have qualities of a good negotiator.


Submit a Comment
  • Om Paramapoonya profile imageAUTHOR

    Om Paramapoonya 

    11 years ago

    Thanks, Sage. I really hope people with credit card issues will benefit from my little advice like you said. :)

  • Sage Williams profile image

    Sage Williams 

    11 years ago

    You offer some excellent advice and are very supportive. Many people will benefit from this article. Nice Job.


  • Om Paramapoonya profile imageAUTHOR

    Om Paramapoonya 

    11 years ago

    Yep, credit card companies can be very tricky. Sometimes it might sound like they're trying to help you, but they're actually not. Thanks for reading and commenting! :)

  • Money Glitch profile image

    Money Glitch 

    11 years ago from Texas

    Good information on negotiating with creditors. And I agree that there are some phony claims that individuals must research and be familiar with to avoid being swindled out of their money. Thanks for sharing your insight on this subject. :)


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