Debt consolidation is one solution to ease your payment. To optimize the benefit for you and avoid risks, first, learn tips on negotiating debt consolidation terms. Let’s check the tips thoroughly in this article below.
5 Tips on Negotiating Debt Consolidation Terms
Don’t worry too much when the debts pile up! It’s normal to be worried when debts pile up. That’s why you should have to consider really carefully when spending. But, when it happens, there’s a strategy for you to repay those debts, such as utilizing debt consolidation. Look at these five tips on negotiating debt terms.
1. Prepare the List of Debts
Prioritize the debts that need to be repaid urgently. Then, you can arrange all your debts and compensate the debt with the highest interest bill first. You can also prioritize the debts that have a creditor threatening legal action.
2. Calculate the Amount
After listing all the debts, calculate what you can afford to pay. The easy way to calculate is by listing your source of income, whether it is your wages or other forms of income. Use this number to count how much you can pay monthly debts.
3. Decide Whom You Need to Pay First
If your debts involve a collection agency, check on them before paying off them. This step is essential if your debts have already been sold to a collection agency (CA).
4. Use Debt Validation Letter
Next, if your debts have been sold to a collection agency, ask the creditors to validate them before you begin the repayment. You also need to use a debt validation letter. A debt validation letter is a letter that includes information regarding the size of your debt, when to pay the debt, and how to dispute it.
You can retrieve the debt validation letter from the debt collectors. Usually, they will send it within five days of first contacting you. Ensure you check the letter as well, as it should include the name of your creditor. In addition, you will only have 30 days to dispute the debt and ask for written evidence.
5. Contact the Creditors
Finally, tips on negotiating debt consolidation terms can be obtained by contacting creditors. Ask them to reduce the payments and interest rates applied to your high-interest debts. Make sure that your total monthly payment does not exceed what you can afford to pay.
You can also ask your creditors to default any late fees to ease your repayment process.
4 Ways to Negotiate Properly with Your Lenders
Remember that you need to improve your communication skills to negotiate debt consolidation terms. There are four ways to negotiate appropriately with the creditors. Look at these points below to see how you can do it.
1. Talk to Them Directly
The first key to negotiating is to talk directly and honestly to your creditors. Before contacting them, ask yourself how much you can afford to pay monthly. If you have the answer already, you can easily converse with the creditors without any worries.
2. Ensure You Maintain Punctual Payments
Maintain punctual payments every time you have to deal with debts! Maintaining punctual payments gives you a good credit score and a remarkable history of responsible credit use. That way, you can get your way in negotiating with the lenders.
3. Collect Relevant Records
While practicing the tips on negotiating debt consolidation terms, you must also collect the relevant records. These records will help you explain your debts adequately. Don’t forget to explain your financial situation politely to your creditors, or you can also ask to speak to their managers.
If you are permitted to speak to their managers, you can quickly point out your request. Ensure you get the agreements for debt relief in writing.
4. Call Again if You’re Denied
Most people think that once they get denied, they can’t negotiate again. The truth is, you can always call them again in the future! Keep improving your credit score, and the next time you need to get reduced interest rates and debt settlement, do not be afraid to contact the lenders again.
Indeed, asking for debt relief or negotiating reduced interest rates may be complicated and burdensome. However, you can improve your finances if you dare to converse with your lender.
5 Risks of Consolidating Loans
Remember that consolidating loans also comes with some risks. You must be aware of five risks and be careful when consolidating loans later.
1. Takes Longer to Pay Off
By consolidating your loans, you may face a longer time to pay off your debts. Moreover, it may cost more since you need to pay more interest over time. For instance, you could extend your loan term if your 5-year auto loan is added to your home loan balance.
2. Expensive Charges
When consolidating loans, the new loan’s fees, interest rates, and charges usually become more expensive than expected. Hence, ensure you check all the charges for the new consolidation loans so you can easily pay off your debts.
3. Beware of the Secured Debt
Don’t forget that the asset given as collateral will be at risk if things go wrong. Usually, people who take a consolidation loan will use the home asset as collateral. Things will be complicated if your house is jointly owned by someone else (for example, your sister), so you’ll need to pay the debt if they can’t.
4. Only Have One Lender
Even when there are tips on negotiating debt consolidation terms, remember you’ll have only one lender to negotiate with. So, be careful when you face financial difficulties again later because you can only deal with them.
5. Beware of Serious Consequences
Pay attention to debt consolidation that is a Part IX of the Debt Agreement under the Bankruptcy Act. Since this agreement often mentions one payment and a government-backed scheme, you’ll face severe and expensive consequences when consolidating your loans.
Hence, ensure you’ll see a financial counselor before you sign the Debt Agreement. The financial counselor can assist you in negotiating with your creditors on your behalf, so you won’t need to worry about additional consequences.
Practice the Tips on Negotiating Debt Consolidation Terms Now!
After learning all the tips on negotiating debt consolidation terms with your creditor, you can try to implement them and adjust them according to your situation. Negotiating debt consolidation terms may be challenging and lengthy; however, it would save you from future financial problems if you decide to do it immediately.
So, don’t worry about anything, and try to take the steps to negotiate the debt consolidation carefuly!