Quick Motivation tip: No matter the type of debt you owe, with the right negotiation strategy, you might be able to reduce your debt.
If you’ve ever been in a position where you can no longer meet your debt requirements, then you would know how it really feels to be financially helpless in the face of embarrassment and psychological breakdown. But even in the face of all that, there is still a light at the end of the tunnel for all borrowers called – debt negotiation. For starters, one of the most effective techniques of controlling your debt is negotiating with your creditors in a bid to reduce the overall amount due. When negotiation goes successful, it might be an option for avoiding bank levies, garnishment, bankruptcy, and foreclosure.
But before sitting with your creditors to talk to them, ensure you get the hang of negotiation strategies, as well as methodologies, to apply when negotiating your debt with certain types of creditors.
Common Debt Negotiation Strategies
Here are basic strategies you can utilize when negotiating with most types of debt collectors/creditors.
Use the available schemes
Irrespective of whether you’ve heard about them or not, the fact remains that there are some schemes specifically designed for the purpose of debt negotiation. And the earlier you know about these schemes the better. By now you’ve probably heard or seen someone ask the rather popular question: “what is an IVA” and you couldn’t help but wonder what they meant. Well, the term IVA literally stands for individual Voluntary arrangement, and it’s a scheme designed to assist borrowers in the event they can no longer keep up. With this scheme, all you need to do is reach out to an IVA expert for more information and assistance on how to negotiate with your creditors, use the IVA payment calculator to resolve your debts, and convince your creditors that you’re, indeed, unable to continue with the existing terns.
Proceed with bankruptcy – if the type of debt you’re struggling with is a business debt, then the best strategy to use in negotiating with your creditors might be the bankruptcy approach. Whether there’s an actual likelihood of bankruptcy in the near future or not, hinting the creditor of a possible bankruptcy in the near future will cause them to decrease their settlement offer.
Target 50% or even less – It might not happen instantly but most unsecured creditors will settle for anything within 30 to 50% of the total debt amount. Hence, you should start your offer from around 15% and negotiate from there.
Possess some cash on hand – Before commencing any negotiation, have some cash on hand because loan creditors are more likely to settle debts if the agreed amount can be sent right away. You’re more likely to get lower debt settlement if you can transfer cash immediately to the debt collector upon agreement on the amount.
As they say, “a bird at hand is better than two in the bush”.
See the big picture – After multiple negotiations, the debtor might be able to settle some debts. The goal in the negotiations may be to eliminate all debts but this is not often possible, hence debtors should seek to eliminate enough debts such that they can pay off the balance in a timely manner over a given period.
Top Ideas to Grab When Negotiating with Particular Types of Creditors
There are moments when your renegotiation strategy will depend on the particular debt underlying the situation. Here are some top tips to help you get ahead with the various types of creditors.
Negotiating with mortgage companies
Modifications on home loans can help some debtors ease monthly mortgage payments and help them keep funds for other living expenses. Reach out to your servicer to learn more about your modification options.
Negotiating Automobile. And other secured loans
If the loan originated from small local banks, it won’t be difficult to negotiate it. If debtors find it difficult to negotiate this type of secured loan, then they should adopt the general negotiation method: proceed with bankruptcy, possess some cash on hand, and see the big picture.
Negotiating Student Loan
It is quite hard to negotiate this type of loan. This is primarily because you can’t liquidate student loans by declaring bankruptcy. However, there are programs offered by the Government to help lessen the monthly payments in certain situations, suspend loan repayments for a particular period, or even nullify your federal student loan altogether.
Negotiating back taxes
It is not hard to negotiate back taxes if it’s several years old. But you need to be watchful of several pitfalls in the process.
Negotiating with credit card corporations
Negotiating with credit card companies does not require any special strategy aside from the basic ones we listed earlier. This seems to be the easiest to negotiate. It may take time and patience before getting a settlement that looks reasonable.
Negotiating Unsecured Bank Loans
For unsecured loans received from the bank, the same basic negotiation method used fro credit card companies can also be utilized. But bear in mind that the laws governing credit unions and the laws governing banks are not the same nor identical. You can utilize the same debt negotiation strategy but it is worthy of note that credit unions may be capable to cross-collateralize debt and make it harder for debtors to settle their debts at 50% or less.
If debtors understand these basics before commencing their first negotiation call with a creditor, debt negotiation can be meaningful and help in easing financial loads. If you need assistance dealing with a negotiation, you may consider reaching out to a lawyer.
This content is sponsored by Uday Tank.