Talking to creditors

When the steps you have already taken – reducing spending, increasing income and following a budget – aren’t enough to ease the financial tension and get you out of debt, the next important step is to get in touch with your creditors. Negotiating an affordable repayment plan and adjusting rates to suit your financial situation is where your debt counsellor becomes your saving grace. Following a systematic approach to get you the best possible repayment plan, your NDA advisor will negotiate with your creditors on your behalf.

The negotiation process:

1.Listing client debt

Creating a detailed list of client debt is integral to assessing the debt situation completely. Each debt on the clients list will include certain, relevant information that includes:

  • Name of creditor
  • Current monthly installment amount
  • Current interest rate on the debt
  • Remaining debt- outstanding amount
  • Whether the debt is secured or unsecured

2.Deciding on order of creditors to negotiate with and amounts to request

Not all debts are equal or as important as others, many may even become affordable once certain others have been reduced, or others may have more dire consequences for non-payment- especially when secured with your needed assets. Negotiating the higher priority is highly important to still maintaining your daily comings and goings. These prioritized debts may include:

  • Past/due rent
  • Bond
  • Car loans
  • Utility bills
  • Court-ordered child support
  • Past/due taxes
  • Student loans

When considering the lower priority debts, it is best to start with the ones that have the highest interest- the ones costing the most each month- before moving down the list. When a creditor does agree to settle, you may request that they list the debt as current and to remove all negative, related information from your credit record.

3.Aligning client budget with new repayment plan

Once a new repayment plan has been made, it is best to create a budget that follows the plan. Ensuring you have your finances in order, missing a payment at this stage can have much worse implications for your finances…not to mention your credit record.

4.Consolidating all financial information on client

Many creditors will want to review a client’s financial information before negotiating a new repayment plan, this is why giving all relevant information to your debt counsellor is so important. As much information as possible is best for an efficient process. The following information will be required:

  • Household budget
  • List of all debts
  • List of all assets and approximate worth
  • Current loan agreements

When negotiating a new agreement, many creditors will ask for a co-signer on the plan. This is important as the co-signer will be liable for repayment if the debtor defaults on their obligation, if this is the case, be sure to pick wisely as the last thing you want is to ruin relationships with debt.

5.Putting it in writing

One an agreement has been decided on, all transactions will be put into writing to ensure all parties understand the terms and repercussions fully. This agreement will include:

  • Its duration
  • All deadlines
  • All payment amounts
  • Relevant interest rates
  • The amount agreed to and the circumstances surrounding each repayment
  • A list of what the creditor has or has not agreed to do- waive fees, reduce repayment periods, etc.
  • The consequences of either side defaulting