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How to Negotiate a Payback Arrangement with Debt Collectors

When you and the collector agree that all the particulars of the debt are legitimate, it’s time for you to make an offer to resolve the obligation, whether the cause of the delinquency was an unintended error or unfortunate circumstances. You can make an offer for a period of time.

Say you owe $1,000. If you offer to pay $50 per pay period for the next 20 weeks, that plan may be acceptable. Or you can offer to pay $25 per pay period until your next raise in three months, at which time you’ll pay $75 per pay period. Offering the amount you’re able to pay is always better than waiting for the collector to demand a certain amount.

You want to convey your concern and reassure the collector that you’re sincere in your commitment to pay. But that doesn’t mean you shouldn’t try to negotiate some concessions. For example, you may want the collector to

  • Keep the matter between the two of you. If, for example, you’re able to pay off your obligation and you’re only 30 to 60 days past due, ask the collector not to report your oversight to the credit bureaus.

  • Lighten the late fees. It doesn’t hurt to ask if they’ll waive any late fees. Be sure to tell them that, if they do, you’ll be happy to get off the phone so you can run to the post office to mail your check. Most — but not all — will agree if they’re getting the balance due without delay.

  • Reduce your interest rate. Not the ideal time to try to get a better interest rate? Actually, it is. The collector wants what’s called a promise to pay from you to resolve your situation. So ask for a break on the interest rate in order to help you pay the debt faster.

    On a delinquent credit card account, for example, you may be looking at a 30 percent default interest rate. The lender knows that adding this much to a strained budget increases the chance of a longer and more costly default or even a bankruptcy if you feel you have no way out. Lenders are often willing to help if you’re sincere.

    If you’re under extreme financial duress, go a step further and ask if they have a hardship program. You may have to meet some qualifications, but if you do, your interest rate may drop dramatically, perhaps even to zero, and may lower your payments for six months to a year.

If you feel that any repayment plan is unrealistic and may push you over the financial edge, work on a spending plan. After you establish your goals, identify your sources of income, and tally up your living expenses, you’ll discover what you can actually afford for debt service.

If working out a repayment plan is too intimidating, if you’re dealing with multiple collectors, if you just can’t seem to communicate on money matters, or if you just want help getting started, a reputable credit counseling agency can help you create a spending plan.

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