How To Negotiate With Creditors
When neogitating with creditors, it is very important to be mature about the situation and realise that as a borrower, you do have a moral duty to repay your creditors. However, if you cannot afford to repay the whole amount borrowed, then you need to accept that fact and communicate it to your creditors.
It is very important that in any communications with your creditors you remain pragmatic and unemotional. It’s very easy to advise people to do this, but it’s not so easy to put into practice. From my own personal experience, dealing with my “bad debts” this last eighteen months has transformed my outlook from someone that did deal with it on a very emotional level, to now someone that is very unemotional.
If you can learn to detach yourself from the emotion of the situation, you are able to think much more clearly and able to make better decisions as a result. Once you do this, you are much better able to face the reality of the situation, which in many cases is facing up to the fact that you cannot afford your debts, but you do need to sort the situation out so that you may move on in life.
Once you realise that you cannot afford to repay your debts in whole, and you want to be pro-active in clearing (settling) the debts, you need to understand this very important fact – it costs your creditors money to pursue your bad debts. So the longer the account(s) are in arrears and therefore not generating any interest (income) for your creditors, they will be keen to recover as much money as they can from you and lend that out to better credit risks where they can make an income again.
When you speak with your creditors about a full and final settlement, you should always have a maximum figure in mind that you wish to pay as settlement, but you should always aim to settle for less than this if possible.
Your starting offer should always be lower than your maximum settlement figure, so for example if you owed £10,000 on a loan, and your maxium settlement figure is £4,000, start out by offering £2,000. It’s low, but it’s significant enough that the debt collection team will realise it’s a genuine offer. Expect this offer to be rejected, so ask for a counter offer, then you are into a negotiation.
The last bit of advice I can give is that you should always be prepared to walk away should the debt collection teams’ best offer be above your maxiumum settlement figure. Remember, the longer the debt is bad, the more likely the creditor will be to want to settle, and for a lower figure as time goes by.