HOW DO YOU DEAL WITH THE CREDITOR ON THE PHONE?

Your situation needs to one of which you have been put through that you believe you can only get out of if they give you this break, or else there is no hope. What would this look like?

THE EXCUSE

–          You are unemployed, or lost your job and need this break, or my employers lowered my income as a cost cutting measure for them to survive, and it has taken me by surprise.

–          You have a medical condition that has stopped you from earning income, and need to find another source of income

–          You have not been getting Government Tax benefits for your child, your spouse has not been paying support, school fees have increased, or child expenses were higher than expected.

–          You have too much credit on credit cards, department store cards, and or mounting debts that the interest is leaving you no funds personally, and you will need to negotiate out of the debt as you soon will not be able to pay the principle let alone interest.

–          You vehicle required fixing this month, and you couldn’t pay with credit as you are not making enough money. It was either lose your job or fix the car, you had to make the expense. (The car is a lease?) Be careful mentioning cars, it is an asset if you own one.

THE SOFT TOUCH

–          Inform them you are taking a course on credit management, and how to deal with this problem, part of this process is trying to deal with existing debts since you have been living month to month in a deficit

–          You are implementing and living by a family financial management plan to put a budget in place and method of paying as many of the debts I can overtime, but I need a break because of my employment status, etc.

–          You, your spouse, your family members have taken on or are looking for jobs to add money to the household, even second jobs.

HOW MUCH DO YOU WANT TO PAY OR CAN YOU PAY?

Be specific, and get it down to a timeline and schedule. If you want to lower credit card debt of $1,000 to $300 paid immediately, some credit card companies will take the change to get the money if you are not in a good position to pay. Lower your monthly payments to an amount such as $50 a month for the next 12 months. You may want to consider discussing this with a credit counsellor, but go through the exercise and get yourself out from under the weight of these debts. Your freedom is something you need to do yourself, and do something about. Get back your free will by letting them know what you can and are willing to pay. Stick to it, its the price of your freedom. Work out the details, such as duration, deadlines, payment amounts, interest changes, upfront payments that need to be made, everything they have agreed to or not to. Try to negotiate that they don’t report the overdue fees to a credit agency or bureau. Define what it means for you to be in default of the agreement. Getting this in writing will assist you in possibly finding friends and family who can lend you the money to pay off the credit card and other debts, and consolidate the loans to a friendly lender.

Explaining the plan for example to a family member who may be able to help you could assist in backing your decisions with creditors if you don’t have the money otherwise. Make sure you document the family loan, I suggest www.documentyourloan.com, and have payment schedules and interest to be made to them versus giving your business to someone else. It also allows for the family member to know, you are serious about repaying the loans. In some cases, you may already have family members you owe money to, document the past loans and the new loan in a new agreement with a payment plan. Do what you can to generate the money for less to pay off the expensive debts over your head.

Once you have labelled the documents, many of the debts you have at this point you may consider consolidating to one creditor and lowering the overall interest rate on the total debt. Sometimes this can be done utilizing a home-line-of-credit or through a credit company. Other times this can be done by friends and family, in some events, there is a new phenomenon that allows for entrepreneurs to be social lenders, and give you a loan to consolidate your debts. In Canada, this type of social lending or peer-to-peer lending has not come to its full maturity. However, within the US, this is becoming a common source of funds, and I believe it to grow in popularity with firms like www.kasu.ca who are initially focusing on helping people develop the loan documents, but has aspirations to develop future business models for Social Lending with institutional partners registered to facilitate such transactions online. It’s an interesting world, and there are ways to find money for your cause.

You may want to discuss agreements with a lawyer before signing off on them. Once you have a final agreement, place them in the budget.

When considering loan consolidation, once you have had a chance to negotiate the costs as low as possible, you should consider:

–          A Bank Consolidation Loan

–          A Mortgage at a lower interest rate, borrowing against home equity with your Bank or another Bank as a second mortgage, refinance your existing mortgage. Consider Annual interest rate, penalties for paying it off in the event that you sell the house, monthly periodic rate, fees, amount of your monthly payment, how long to repay, balloon payments and expiration. There are pitfalls, and many things to be careful of with the home, so make sure you are aware and Google and research as much as you can on home equity line of credit do’s and don’ts.

–          Transferring higher interest debts to lower credit card interests, check the internet for websites in Canada than may list some competitive offers

–          Cashing retirement funds or borrowing against it if this has less of a tax consequence

–          Borrow from friends and family, but document the loan as them consolidating your debts, and build a payment plan for them

Key points to consider, borrow as little as possible, try to lower interest rates, pay off debt as quick as possible, get it as low as possible, try to avoid secured loans, avoid penalties, get the agreement reviewed by a lawyer, don’t just sign because they offer you what you want, beware of high pressure sales people or those pushing to sign that day. Don’t pay upfront fees to anyone, don’t borrow more than you can, and don’t take loans you can’t pay back according to your budget or plan.

Use a  credit counselling service to get a grip on your finances if you simply find you can’t find the motivation to do all of this on your own. Google the do’s and don’ts of Credit Counselling, there are many sharks in the business, most Government Agencies provide suitable debt counsellors and referrals.

If you need to document your loans with friends and family, I suggest purchasing a loan document from www.kasu.ca also known as www.documentyourloan.com. Make sure you get all of your loans with friends and family documented. You can buy a loan document for as little as $59.99, versus paying a lawyer $100 for a simple document. Get those loans in writing now!

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