How to Negotiate with Creditors

Keep in mind that negotiation is not just for alleviating financial strain; if your financial circumstances have improved, you may be eligible for better conditions. If you would like to accelerate your repayment schedule, or you’d like to negotiate fewer fees for bundling services, for example, it may pay to re-evaluate your current terms. Alternatively, if you owe money to a creditor, and the terms that you originally agreed to are no longer working for you, then it may be time to try to negotiate.

“Any time you’d like to see a change, is a time to negotiate,” says Bruce McClary, Vice President of Communications for the National Foundation for Credit Counselling.

But sometimes, the cost of achieving your desired outcome may not be worth it. “Know the consequences of what you are asking for,” advises McClary. “How much does it cost to achieve the outcome you are looking for?”

In order for a creditor to make any kind of change to your loan or outstanding debt, the creditor will have to take a very close look at your financial file. You may have to provide one or all of the following things, depending on the situation: 

·      Statements of income

·      Proof that you need financial relief

·      An up-to-date credit report, which the creditor will look over to determine the overall health of your financial situation

While erasing credit entirely is highly unlikely, there are a few things you have room to negotiate on:

·      Lower interest rates

·      Fewer fees

·      Total amount you owe

·      Length of repayment, or the time you have to repay the loan

Some of these terms can be a bit more difficult to negotiate; for example, determining a new repayment plan may involve re-financing, or entirely new loan agreements—which come with fees.

Once you know what to ask for, you will be able to tailor your approach to achieve precisely that: if you are looking to lower the total amount you owe, you will need to show you are struggling financially. This can also be important in relation to debt owed by deceased relatives.

Its important to pull your credit report first, before making any decisions on next steps. Dispute any inaccuracies in the report first, before trying to negotiate with creditors.

If you’re looking to get more favourable terms, like a better interest rate or fewer fees, you have to be able to demonstrate that the overall health of your credit file is better than before—which means providing documentation that shows this. It helps to have credit reports from the past, as well as any supporting information like new pay stubs or proof of income to show the improvement of your situation.

You should also check to see if you qualify for what you are asking for. For example, certain credit cards require a minimum personal or household income.

But McClary advises to not limit yourself too much by what you think the response from the creditor may be.

“The worst that can happen is they say no,” says McClary. “You can always ask for anything, no matter what the possible answer may be. It is your right as a consumer to ask.”