Finances are not the most pleasant experience for most individuals, especially when they have to deal with creditors they cannot afford to pay. Most creditors, especially those in the unsecured debt sector, will be ruthless in their attempts to get their money, but it’s important to keep your composure and not react irrationally. The following are 5 tips to follow when dealing with creditors & how to avoid mistakes:

1. Check credit report: One of the first things you should do before conversing with a creditor is check your credit report. Sometimes, mistakes can be made and you may be getting hassled for debt that has already been paid or better yet, debt that isn’t even yours.
2. Understand the law: The Fair Debt Collections Practice Act is a law that gives rights to consumers and regulates the practices of collection agencies and creditors. By educating yourself on what creditors can and cannot do, you will be able to defend yourself more confidently and creditors won’t be able to manipulate you into making a poor decision.
3. Avoidance is not the key: It’s natural to retreat to “flight” mode when you owe someone money. However, it pushes the creditor into a corner and leaves them with mostly unpleasant options for both them and you. You should actually call the creditor before they call you- it shows the creditors that you are proactive and they will be more likely to give you less of a hard time.
4. Be honest: Although resistance is typically the first impulse when being bombarded with questions about your finances, employment, personal circumstances, etc. it is important to be honest with your creditor. By explaining your situation, you will more likely convince the creditor to reduce interest rates, reduce minimum payments due, or even settle debt.
5. Get everything in writing: This is probably the most important tip when dealing with a creditor. If you don’t have anything in writing- you don’t have proof. There are so many court cases that get thrown out because of “lack of written proof”; so, make sure you cover your bases. It’s also important to write down who you talked to, when you talked to them, what they said, etc. Nothing is worse than being offered a settlement, and then losing credibility because you couldn’t remember their name.

Negotiations with creditors can be stressful, but keeping a level head and interacting respectfully will make negotiations and conversations easier and more productive for both you and your creditor. Remember, you and your creditor actually have very similar goals: to avoid bankruptcy, avoid having to go to court, create affordable payments to avoid further delinquency, etc. so, as long as you try your best the creditors will work with you.

About the author:

Compass Technologies is the company behind Kwik-Loan consumer finance software and Kwik-Dealer indirect lending software.