It can be very stressful to owe money, especially if you are overdue and facing creditors. Problems can become more complicated if you have to deal with a collection agency that is working for the creditor. The creditor will most likely regularly report information about you to the credit reporting agencies, which will hurt your credit score (if you are wondering about your credit score or history, you can find out more here).
If you owe money and you haven’t paid it, the best thing to do would be to pay it off quickly and then try to improve your credit score, but that isn’t always possible. If you are dealing with persistent and pesky creditors, they will continue to hound you until you either pay off your debt or respond in a meaningful way. If you can’t pay off your debt immediately, there are still ways you can deal with the creditors and keep yourself sane.
Usually the first step to take is to talk to your creditor. If your loan has gone to a collection agency, you might have more trouble with this. However, most big companies have 1-800 numbers that you can call and speak with a real person. You can try calling your lending company first, but if your loan has progressed to a collection service, you might have to deal directly with them. Just by calling and talking to someone you will be taking a proactive stance on the problem, which will at least show you are trying to deal with the issue, instead of simply avoiding it.
Lenders can choose whether they report information about you to the credit reporting agencies, so working with a creditor also might help save your credit score. If lenders see that you are making an effort, they might be able to remove anything that looks poor on your report, as well. As far as what you can actually work out with a lender, that will depend on the actual company. Your best bet will probably be to work out a payment plan and stick to it.
Determine if you can lower your monthly bill, or if you have student loans or other loans that can be deferred, try doing that. You can also consider transferring your loan to a different lender with lower interest, but again, much of this will depend on your individual loan and how far overdue you are.
If you have only been late on your payments a few times, you can talk to your creditor about that, and the company might be able to remove any negative reporting. This will especially be the case if you are able to agree to pay regularly through a more manageable payment plan. However, many people face large debt or are many months behind by the time they interact with creditors (and particularly, with collection agencies). You may not have as much negotiation room if your bill is long overdue, but it’s still worth trying.
Many collection agencies train staff to be pushy, and that can be overwhelming if you are not used to it. A representative’s job is to get money from you, so even paying a little bit might get that person off your back temporarily. If you try to negotiate and you are refused, keep asking to be transferred until you are connected with a supervisor, and then try to negotiate again. In general, creditors and collection agencies won’t really be interested in your life details, so avoid long personal stories. If you are having a difficult time financially, state the fact and then move on and try to reach a solution.
When you do come to an agreement, make sure you request the terms in writing, particularly if your monthly bill or interest is changing — you will want to have proof that you came to an agreement.
If you are feeling really lost or if creditors or collection agencies are demanding money so much that you are feeling overwhelmed, consider getting free help or advice. There are some legal aid clinics and credit counseling agencies that may be able to assist you by providing free or affordable help getting out of debt and dealing with creditors. Be sure to be careful about who you ask, though, and avoid scams. Search for legal aid and find a reputable person to help.
Lastly, be sure to avoid some common debt negotiation mistakes. Determine if your debt is secured or unsecured (whether the creditor can take your property if you don’t pay); if you know for sure, an unsecured collector can’t successfully threaten you. Also be aware of your creditors’ weak points and strengths, so you can negotiate more effectively. For example, many creditors won’t sue because it is very expensive.
If you have to deal with creditors or collection agencies, hopefully you can at least reduce your debt over time or come to a different agreement that is manageable for you.
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