Are you seriously in debt to the point where you’re almost ready to give up and file for bankruptcy?
You have options that would be much better and one of them is to negotiate with your creditors.
Yes, you can actually negotiate with your creditors to get your interest rates reduced, to get your payments reduced or waived or even to settle them.
But it’s important to know how to negotiate over specific types of debts. For example, you can’t negotiate an auto loan same way you could negotiate a credit card debt.
If you’re having a problem making your car payments
An auto loan is a secured debt meaning that your car is the collateral that secures it. If you’re having a problem making your auto loan payments your best option might be to just sell the car, use the money to pay off your lender and then buy an older but reliable used car.
Have you missed just one payment? Then the good news is that you do have a couple of options. First, you should immediately call your lender and ask to speak with someone in its customer service or collections department. You must do this very quickly because if you miss just one payment your lender isn’t required to get a judgment to repossess the car. It can just send a tow truck to take it away.
When you talk with your lender the first thing you could ask for is an extension. If your lender grants one you would then make that delinquent payment at the end of the loan. The lender will charge you a fee for the extension which could be $25 or possibly 1% of your outstanding balance.
Second, you might be able to get your lender to change the date your monthly payment is due closer to when it is you get paid.
Finally, it’s possible that your lender will agree to rewrite the loan so that you will have lower monthly payments. However, there is a downside to this, which is that it will take you longer to repay the loan.
If you’re having a problem with your auto lease payments
If this is the case, then the first thing you need to do is review your lease agreement. The federal Consumer Leasing Act requires that your lease disclose a lot of information including the conditions under which it can be terminated early and the fee for early termination or at least a description of how the fee will be calculated.
Canceling an auto lease is possible – if that’s your goal – but what happens if you default and how you could terminate the lease early – should be spelled out in your contract. The odds are that the early termination fee will be pretty hefty. But you might be able to get the leaseholder to reduce it.
if you’re having trouble making your mortgage payments
About the only way to get a mortgage payment reduced is to get your mortgage modified. This will mean providing your lender with documentation such as your recent mortgage statement, legal forms of identification, your W-2 and your property tax statement. You will also need to submit a list of all of your debts with the amounts you owe and your monthly payments. You will also be required to submit a hardship statement stating why it is you can’t afford to make your current monthly payment.
If you are able to get a modification you will have a lower monthly payment but the odds are this will extend the term of your loan so that it will take you more years to pay it off
If your problem is credit card debts
Credit card debts are unsecured debts so in most cases are the easiest to negotiate. In fact, it’s possible to negotiate with credit card companies to settle your debts for less than their balances.
However, you will have to offer a lump sum payment to settle any credit card debt. This means you’ll need to accumulate cash before contacting a credit card issuer. This could mean taking a part-time job, selling your valuable collection of baseball trading cards or hitting up a relative for the money. But it’s critical to have the money ready because that’s basically the reason why the credit card company will agree to settle – so it can get the money now – rather than gambling on future payments that may never come.
If you’re having a problem making loan payments
If this is your problem, you should be able to negotiate with your lender to refinance your loan. Interest rates today are at almost an all-time low so if you have a loan at 12% or higher you might be able to refinance it into one with an interest rate as low as 4.74% APR, which would mean much lower monthly payments. The downside to this is that it would extend the term of the loan so it would take you longer to pay it off.