Negotiating with Creditors: Establishing a Debt Repayment Plan

Credit card spending can cause serious financial damage. Borrowers who are irresponsible with their credit lines will end up paying interest rates on the original debt, and paying higher rates on new borrowing due to past late payments. However, once you begin establishing a debt repayment plan, you can take steps to get your finances back on track.

Negotiating With Credit Card Lenders

When negotiating with your credit card lenders, you should be persistent. If the first representative isn't willing to consider lowering your interest rates, ask to talk to their supervisor. Once you find a representative, outline how you've taken steps to correct your finances. The higher your credit score, the more likely it is you'll be able to secure lower borrowing rates.

Establishing a Debt Repayment Plan

If you decide to establish a debt repayment plan, first make a list of the following for each creditor. This should include:

• Any late payments you've made (and repayments on this debt)
• The collection agency now handling the account
• The original creditor
• Your total outstanding debt.

After you gather this information, you're prepared to start calling lenders to negotiate payments. You can either ask to establish a debt repayment plan or for a lump-sum payment. Whichever option you chose, ensure that your creditor will agree to remove negative information from your credit report.

If you succeed at having your rates lowered, ensure you make every payment on time. If you don't this, this negative information could be reported to the major credit bureaus and hurt your credit score.

General Tips for Dealing With Creditors

When negotiating with creditors:

• Be specific: Tell your creditor the exact amount you can give them each month.
• Don't promise to make a payment you can't afford: This could hurt your negotiations in the future and lower your credit score.
• Make copies of all correspondence: Take notes during phone conversations between you and creditors and collection agencies, as you could leverage this information if you need to dispute the information on your credit report.
• Stay in touch: Don't ignore letters or phone calls from your creditor or collection agency.

If your negotiations are not successful, you may need to consolidate your debts or get credit counseling. Due to this risk, you should be aware of what happens when debt consolidation fails.