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Negotiating Repayments

By: Garry Crystal - Updated: 27 May 2012 | comments*Discuss
Negotiating Repayments Creditors Debtors

When it comes down to repayments of debt and negotiating repayments the debtor is usually in a better bargaining position than the creditor. But how much leeway is given with regards to renegotiation can depend on the type of debt and how much is owed.

Contacting Creditors

It is always better to contact creditors first if you are having debt problems. If your loan or credit is unsecured then you do have a lot of bargaining power regarding your repayments. Creditors are more than likely to negotiate repayments as it is in their best interests to avoid any recovery processes that will cost them time and money. They also know that the likely chances of seeing their money again will seriously decrease if court action is taken.

Creditors who have given loans and credit with secured guarantees have more chance of seeing there repayments being met. Fear of the repossession of goods or property is a big motivator when it comes to paying debts but even with secured loans there is always room to negotiate.

How to Negotiate Repayments

If you feel you may be about to miss one or two payments, or if you are finding repayments difficult to keep to then always contact creditors before they contact you. Arranging new repayment terms before you have missed any payments can stop any bad credit record being placed on your credit file. Creditors should look favourably on people who contact them to explain their repayment difficulties and have a repayment plan already in mind.

Be Honest with Creditors

Being open and honest with regards to your repayment difficulties is the best way when negotiating repayments. If you are unrealistic with your repayment offers then it is unlikely that you will stick to the repayment plan. Make sure that any negotiations and repayments are ones that you can realistically afford. You should only look to negotiate payments once; having to call a creditor a few months down the line and ask to make even lower payments will not be looked on favourably.

Repayment Types

There are a few ways a creditor will accept repayment changes depending on your financial situation. You can either stretch the repayment length and lower your repayments or lower your repayments until you can reasonably afford to raise them. There may also be the option of stopping interest payments for a length of time until you are in a position to continue the payments.

Another option that is widely used by credit card companies to recoup some of their money is to take off any amount of interest from the balance of the bill. This way the total balance will be less; this option will usually only be offered as a one time payment and will need to be paid as a lump sum.

Keeping to Repayments

Once you have negotiated a new payment plan and received the new plan in writing it is important that you keep to the schedule. Consistently missing payments will lower any confidence that your creditor has in you and they may have no choice but to proceed with recovery methods. Missed payments may also be recorded on your credit file and this will make obtaining credit in the future very difficult. You will look like a bad credit risk to other lenders who are considering lending to you.

Most creditors will be understanding when it comes to negotiating repayments, as long as you have valid reasons and a repayment plan in mind. If you are having trouble with debt, you can contact a credit counselling service that will contact creditors for you and arrange repayment plans at a lower rate and usually with interest stopped. Hiding from creditors will not help; they will only step up methods to recover their money. Talking to them is the best solution when it comes to your debt problems.

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