Nearly everyone finds themselves in debt repayment and cash-flow difficulties at least once in their lifetime. There are various ways you can reduce, manage and eventually eliminate debt. Here’s how you can reduce debt by negotiating with creditors. This is just one of a number of debt elimination approaches you can take to get on top of your finances, eliminate all your debts and wipe your financial slate clean.

Everything in life is negotiable, even debt! Only one thing worries a lender more than not making profit and that's bad debts i.e. not been able to collect the capital amount lent (never mind the interest). You can renegotiate interest rates, payment terms, fees, penalties etc. Never take a payment demand at face value. Always negotiate with your lenders. Here are a few guidelines on how to negotiate with creditors.

Rule # 1 Do Not Avoid Your Creditors

Fear may tempt you to avoid lenders and debt collectors who demand payment. But you can really benefit from talking to them. Often, if you talk to your lenders, you can let them know you are doing your best to pay your bills, but are having difficulty making the payments demanded. You are now at least communicating with your lender. If nothing else, this gives you time to address your financial situation and takes the pressure off. Nothing annoys a debt collector more than unanswered emails, phone calls etc. It’s best to state your position with them early on and write to them explaining your situation and proposing a payment plan.
The lender may then propose a settlement that could provide some relief from your debts. This could mean them offering a lower interest rate or giving you a moratorium on payments for a few months or possibly even writing off a percentage of the debt (usually subject to you paying in full straight away the new, agreed settlement amount). Creditors like to know that you are working to pay your bills, so take the initiative and talk to them personally.

Rule # 2 Always Focus on Getting Agreement

Some creditors will be more aggressive and demanding than others. However, no matter how much huff and puff your creditors exude, always keep your calm and stay focused on reaching an agreement. This is a critical rule in any negotiation. The creditor has more to lose than you if you think about it so in one sense you have the upper hand and a strong bargaining position. Avoid a stand-off and always keep the lines of communication open. A good book on negotiation called “Getting to Yes” by R. Fisher and W. Ury gives excellent insights into the art of negotiation and reaching agreement.

Rule # 3 Pay Only What You Can Afford to Pay

When negotiating an agreement with your lender(s) you would do well to devise a payment plan in advance based on your actual income and expenditure. Remember, this is YOUR repayment plan. Get agreement on your repayment plan and not their version of your repayment plan and get it in writing. Lenders will want to see an income and expenditure spreadsheet so have this ready. However, don’t let creditors trawl through your spreadsheet demanding explanations. Be firm and tell them politely it’s none of their business really. You owe them money, nothing else.

Utilizing simple yet powerful debt elimination approaches like negotiating with lenders can really help you reduce and eliminate debt and put you on the road to real wealth creation. Discover numerous ways to eliminate debt and get on top of your finances.

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