Falling behind on loans and dealing with collection calls can be extremely stressful and very scary. If you’re having trouble making payments, here are five steps to negotiate a partial payment on a loan.
Know What You Can Afford
Write down your income and expenses to figure out how much you can realistically afford to pay. Make sure it is a realistic amount. There are several things that may determine how flexible the creditor may be to establish a payment plan with a reduced payment, for example, the type of loan, the amount owed, the interest rate, and the past due status of the loan. If the loan is not charged off (usually less than 180 days past due) determine how much you can afford for a payment plan. If the loan is charged off (usually 180 days or more past due), it may be best to come up with a lump sum amount to settle the debt for a lesser amount.
Communicate with the Creditor
Speaking with the creditor’s collections department can be very scary and intimidating. Most creditors are willing and able to assist borrowers dealing with financial hardships, but they won’t know how or if they can help if they are not clear about your financial situation. Be honest with your creditor about your situation and explain to them how much you can afford to pay.
Ask about Payment Plans or Financial Hardship Programs
If the creditor does not volunteer partial payment plans or financial hardship programs, ask them what, if anything, is available to reduce your payments until your financial situation improves. Some creditors have programs to assist borrowers dealing with temporary financial hardships.
Put Everything in Writing
After you have communicated with the creditor and a partial payment plan has been agreed upon, request the new payment agreement be put in writing and sent to you for your records. Also, document all conversations you have with the creditor for future reference and backup. Make sure to include the date and time of the call or meeting, the name of the creditor and who you spoke with, the new payment terms, and when the partial payment plan will begin and end. It is also a good idea to mail a copy of all agreements via certified mail to ensure receipt. Keep all correspondence from the creditor sent to you for future reference.
Contact a Credit Counselor
If you are not comfortable with negotiating or unable to negotiate partial payment terms with the creditor, contact a local, reputable, and free credit counseling organization, like CESI, to communicate with the creditor on your behalf. Credit counselors are able to advise you on your options or whether it is in your best interest to negotiate a partial payment on certain loans. They can offer a wealth of knowledge and experience dealing with creditors.
The worst thing to do is to ignore creditor’s collection calls. Ignoring creditors may make your situation worse if they take more aggressive collection or legal action. Most creditors want to help borrowers with a willingness to repay the loan while they deal with temporary financial hardship.
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