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5 Tips for Negotiating with Your Creditors

May 1, 2019

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Some things come with a fixed price tag, like groceries at U.S. supermarket chains. When you get to the cash register, you’ll be expected to pay the exact amount shown. But other items have some leeway—like most vehicles on a car dealer’s lot. Sure, there’s a price sticker affixed to every window. But it’s a well-known fact that savvy consumers may be able to walk away with the keys to the vehicle they want for less than the original asking price with a little creative haggling.

Think of debt more like buying a vehicle than a bag of groceries. That big, bold number at the bottom of collection notices isn’t necessarily what you have to pay, provided you’re able to successfully negotiate with your creditors to reach a lower settlement.

Here are five tips to help you navigate the process of negotiating with your creditors.

Tip #1: Start with a Low Offer

If your debt is in collections, it most likely means a company has purchased it from the original creditor at a reduced rate. So, this new creditor can still turn a profit even if you pay less than the original balance. Herein lies your leverage for negotiating.

The Simple Dollar recommends kicking things off with a low offer, around 10 to 15 percent of the amount owed. You’ll probably end up paying more like 30 to 40 percent but starting low gives you the best chance of reaching a favorable agreement.

Tip #2: Know Your Options

There are a few ways to go about negotiating with creditors. Some consumers choose to do so on their own. Others enroll in debt settlement programs like Freedom Debt Relief. What’s the difference? Working with a reputable debt relief organization means professional negotiators will reach out to creditors on your behalf—but for a fee if they’re able to settle your debts. Doing it yourself means you avoid paying a fee, but some people find it stressful or difficult to get the results they want.

You have options. Explore them before picking up the phone to either call creditors directly or sign up for debt settlement. Figure out which path is best for your circumstances. 

Tip #3: Be Prepared to Pay Quickly

Creditors are more likely to accept settlements when you can demonstrate you’ll pay in a timely manner. This is why debt settlement programs require consumers to make monthly deposits into a special account until they’ve saved up a certain percentage of their original balance. Even if you’re handling negotiation on your own, it’s a good idea to have a chunk of change saved up before attempting to settle. Think about how much more compelling it is to say, “I can pay you X amount today.” 

Tip #4: Get Everything in Writing

You’ve reached a settlement. Congratulations! But before you celebrate, make sure you get the terms in writing. This is the best way to protect yourself, especially if creditors try to reach out in the future about the same debt.

Tip #5: Know Your Rights

It’s important to know your rights whenever you’re facing debt collection. Creditors may attempt to make it feel like you don’t have any rights. But you always have the Fair Debt Collection Practices Act (FDCPA) on your side, which states creditors are disallowed from:

  • Harass or abuse you.
  • Lie about how much you owe.
  • Use deception in an attempt to collect.
  • Tell anyone else you owe money.
  • Claim you’ll be arrested if you don’t pay.

Knowing your rights will help you reach out confidently to creditors and engage in productive negotiations rather than acting from a place of confusion or fear.

Planning on negotiating with your creditors? Keep these five tips in mind as you work toward settling your debts for less.

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