Negotiating with Creditors if You Cannot Pay Credit Card Bills
If you are no longer able to meet your credit card obligations and can no longer use 0% APR credit cards to transfer high rate balances, you may need to negotiate with your creditors to work out your credit card debt. There are many agencies and credit counselors who help people negotiate with their creditors. Before you contact agencies and counselors, though, you should at least attempt to negotiate with your creditors on your own, and try a few debt reduction techniques you might be surprised at what you can accomplish on your own.
Avoid Collections
Credit cards and loans are turned over to a debt collection agency if you fail to make payments. You’ll damage your credit score if you allow this to happen and it can make it difficult if not impossible to get new credit cards or loans in the future. If you do get approved, you’ll end up with high interest rates. Many times you can avoid collections simply by staying in communication with creditors, and sending as much as you can afford to send – even if it’s less than the amount due. If you know you’ll be unable to resume making normal payments for a long time, be proactive and call your creditors to make new payment arrangements.
Prepare to Call Creditors
Make a list of all of your credit card accounts, loans, and other debts. Include the balance owed, minimum monthly payment, interest rate. Figure out how much you think you could send to each one on a monthly basis, and then start calling to negotiate.
Negotiating With Creditors
Explain to the customer service representatives that you’ve entered a financially difficult time period, but you want to continue making monthly payments. Ask if they can help you out with a revised payment plan that might include lowering your interest rate (so more of your payment goes toward balance owed), or a temporarily lower minimum payment. If you have a monthly payment amount in mind, don’t be afraid to ask if they can accept it, until you are back on your feet. Many credit card companies are prepared to work with their borrowers.
Get Negotiated Amounts in Writing
Once you’ve worked out the details of your new payment arrangements, ask the credit card company or other creditor to provide the details to you in writing. That way there are no misunderstandings later when you start making payments according to the new agreement. If you don’t take the time to get it in writing, you may find yourself paying higher interest rates or late fees when you send a lower payment, and no way to remove them. The written document will give you the leverage you need should any problems arise after negotiations.
If these efforts fail, consider contacting a non-profit credit counselor such as those that can be found at www.nfcc.org.
