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5 ways to negotiate your debt when cash flow is slow

Getting out of debt is hard enough—especially when you just don’t have the extra cash to pay all those old bills. Now may be the time to negotiate with your creditors to see if there are any options available to you.

Before contacting them, assess your overall finances. Break down what you owe each creditor and develop a budget. Focus on eliminating or reducing expenses on items like your cell phone and cable bills, as this will free up more cash. From there, determine how much you can afford to pay monthly.

Next, pick up the phone, take a deep breath and call your creditors. Once you’ve gotten past the automated messages, ask to speak to a manager. It’s likely that a representative will not have the authority to make your requests happen, whereas a manager has the power to offer more options.

Here are some ways to negotiate with a creditor who has the authority to assist you:

1. Ask for a payment deferment or forbearance

If your cash flow is slow and you cannot afford a payment, then ask your lender if this option is available. Many banks and financial instutions are willing to work with you during your difficult situation, and they may allow you to skip a payment. Remember, if they allow you to skip a payment or two, this will not eliminate interest charges. Interest will continue to build on your account.

2. Ask for a lower interest rate

One of the reasons getting out of debt is so difficult is due to higher interest rates. In turn, making your minimum payment may seem futile, because most, if not all of it, goes to interest. If this situation applies to you, ask the lender if they will reduce your interest rate for a few months until you recover financially.

3. Ask for a lower monthly payment

If you are behind several months or have a large balance on an account, making the monthly payment may seem impossible. Therefore, it’s important to contact your creditors to see if they can work with you. In some cases, they may reduce the amount you pay each month for a fixed time. This gives you a chance to make payments on the account that are more suitable to your financial situation.

4. Ask about any programs that may be available to you

Many lenders understand you are going through a tough financial situation, and they may be willing to work together to make a feasible plan. Depending on the bank or financial institution, they may offer a program where you pay a smaller monthly payment at a reduced interest rate for a fixed time. This can help you make payments on your account while you try to get back on your feet.

5. Have a credit-counseling agency speak on your behalf

Many credit-counseling agencies offer debt management programs, where they will work on your behalf to negotiate with your creditors. Often times, the counselors are able to help you lower your monthly payments at a reduced interest rate.

Ultimately, the first step to this process is to assess where you are financially. From there, you will have an idea of how much you can afford to pay your creditors. Take the initiative to contact creditors and share your financial difficulties.

There’s a good chance they will be willing to work with you to settle your debts, even if it entails finding a long-term solution. Stick to the plan they offer you and soon enough you will find yourself getting back on your feet, returning to a position where you can responsibly manage your finances.


Alanna Ritchie is a content writer for Debt.org, where she writes about personal finance and little smart ways to spend (and save) money. Alanna has an English degree from Rollins College.

Image courtesy of Gualberto107 / FreeDigitalPhotos.net

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