Before we even get into how to negotiate with debt collectors, let’s explore the “why” - why should you even try negotiating with creditors on behalf of your clients? The answer is that both lenders and collection agencies are almost always willing to work with people on their unpaid debts.
While some of your clients might be playing the ‘I never answer the phone’ card, it’s actually in their best interest to engage in discussions about how they can lower and repay their debts.
That’s where you come in - as a credit repair specialist, you can not only help your clients reduce and repay their debts, you can also assume responsibility of the process and shift the burden and stress off of them.
There is a bit of learning curve with debt negotiation, but like all things the more you do it the easier it gets. Here are 5 places to start:
It’s paramount that you understand why your client is in debt so that you can relay the issue to the creditors. Debt collectors are people, too, and knowing both what happened and how your client plans to fix it puts you in a much better spot to negotiate.
Questions to ask your client include:
While it’s always a good idea to confront debt head-on, it’s particularly important if your client has been ignoring the calls of collectors. It’s your job to appear willing to negotiate and you can’t do that if you stall or postpone the process.
Go on the offensive by doing 3 things:
A credit negotiation extends beyond the balance - you can also discuss lowering other aspects of the debt in order to reduce the total amount owed and lessen the future impact of the ordeal.
Start with these:
As the negotiation with creditors progresses, there will come a time when they make an offer to settle the debt. Your goal during this step is to settle for as close to 50% of the original amount as possible. Unless their offer is in the ballpark, you need to respond with something more favorable to your client (a good place to start is 20% of the amount owed).
Negotiation is a process, so don’t be surprised if there is a lot of back and forth - just remember that they want this to work as much as you do and almost always have more leeway than they let on.
This is the perfect place to reiterate pieces of your client’s story - maybe they only have a limited amount of money for repayment or suffered some financial hardship, it’s your job to use the story to support of your counter offer.
Once you’ve come to an agreement with the creditor, request that they send everything over in writing. It’s important to document the agreement before paying anything. Be very suspicious if they are not willing to do it. The library in Credit Repair Cloud has letters already written for this purpose.
Things to ask for include:
How to negotiate with debt collectors may vary based on the type of debt you’re working with.
Debt is diverse and it’s worth mentioning the different types of creditors you’re likely to run into while running a credit repair business. Full details are beyond the scope of this post, but these will at least give you a solid platform on which to negotiate.
These types of loans are generally fairly easy to negotiate on but you’re likely to see more success if the lender is small and the client has some cash to settle the debt immediately.
Money owed via a student loan is very hard to get lowered or dismissed and if you’re going to pursue this it’s easier to use an established program like Student Loan Forgiveness rather than negotiating with the creditor directly.
Most credit repair specialists have success negotiating with owed taxes, but your chances increase the older the taxes are.
Traditional lenders like banks and credit cards are always willing to negotiate when it comes to debt. However, despite the likelihood of success, don’t expect to settle for less than 50% of the total amount.
If you’re starting a credit repair business it’s likely you’ll develop your own process for how to negotiate with collections agencies over time. What’s important is to develop and document a process so that you can not only measure what works but also provide a blueprint for your team as you grow.