In any negotiation, there are some key rules to know in order to come away with what it is that you want. The same holds true when you are negotiating with your creditors. Be sure to keep the following 5 tips in mind when you are going through the creditor negotiation process:
1. Never show all your cards
Your creditors will likely ask you what you can afford to pay each month on the debt you have with them, the number of interest only payments you want to make, how long you’ll need reduced payments for, and so on. Never let the creditor know the full amount you are able to pay! By holding a little back, you’ll have some room to negotiate with them. In some cases, creditors will accept the first offer. Many more, however will enter into negotiations. If you’ve shown all your cards, you’ll be out of luck.
2. Know exactly what your bottom line is
Know what the minimum is that you need to get out of the negotiation and know what the max that you can afford to pay a creditor each month. Never agree to more than that, or you risk not being able to live up to your agreement and will likely lose that creditor as one that will work with you in the future.
3. Know that you’ll have to give a little to get a little.
A successful negotiation is only successful when both parties come away from the negotiations with something. In the case of a creditor, they may be willing to drop the monthly payment or interest rate, but you may have to provide them with collateral to do so. Your goal here is to give up as little as possible, but be realistic – you may indeed have to give up something to get something.
4. Understand who has the edge in your negotiations
Clearly, who ever has the upper hand in a negotiation will have the stronger bargaining position. The person in the weaker position will likely have to come up with a little extra in order to come up with anything during the negotiations. Your creditors will likely be the ones with the edge, especially your secured creditors. But, with unsecured creditors, you could have the edge if your financial situation is dire and you have no assets of value.
5. Never get angry, demanding or confrontational during negotiations
If you fly of the handle easily, you best have someone else handle your creditor negotiations for you. If you are rude or confrontational with a creditor you are trying to negotiate a better deal with, they will likely cut you off and not want anything to do with you. If you are in the middle of a creditor negotiation and you find yourself getting upset, end the call and resume it after you’ve been able to cool down and clear your head.