Interest rate is defined
as the proportion of a loan that is charged as interest to the borrower,
typically expressed as an annual percentage of the loan outstanding. Sometimes interest
rates are so high that the amount you pay mostly covers the interest
payments. Please know that you can work with your creditors and reduce their
rates.
Before you begin the
process, you need to have a sincere desire to be debt-free, and you should be
doing everything you can to make as many payments as possible. Remember, that
you owe this money, and you are looking to negotiate what you owe.
The premise of the
negotiation is that financial institutions are willing to take a lower payment
in lieu of sending the balance to a collection agency. The sale of your balance
to a collection agency usually results in a 50% loss for the institutions. So,
they are ready to work with you, if you show them that you are willing to work
with them.
Step 1:
Pull a credit report and
look at all the debt that is shown on it. If there is anything on it that you
do not owe, contact Mayanah Financial Coaching immediately.
Step 2:
Gather all your credit
card/store card statements and understand the minimum payment, balance amount
and interest rates.
Step 3:
Make a budget and have
an idea of how much you can pay every month.
Now, it’s time to call
the financial institution and have your month payment/interest rates reduced.
Your attitude is very important as you are going to press on until you get what
you want. You will most assuredly not take NO for an answer during the first
time. However, you need to be cool, calm and collected. Raising your voice or
sounding agitated will only backfire on you.
Remember that you owe the
money and the financial institution wants your money desperately. You are
trying to negotiate with a big bank. You may think it is intimidating, but
actually it is not.
The conversation should
look like these for two separate scenarios:
Scenario 1: Trying to
reduce interest rates and monthly payment.
You: I was looking over
my credit card statement and noticed that I am paying more than other credit
card companies. Is there any way you can reduce it?
Company: I am sorry we
cannot do it any better. You know, we do not set the rates – it is done at the
corporate level.
You: Ok. I am
considering a balance transfer as I have received a 0% interest card. I
know it will reduce my payment a lot. I hate to switch from you. But, it looks
like I have no other option…Is this the best you can do?
Company: We would love
to continue having you as a client. I think we can reduce a little bit.
After they give their
offer – follow up with:
You: That is not enough
and nowhere close to 0%. May I talk to your manager?
(Repeat the whole thing
again. Worst case scenario is to pull some Customer Service VP number from the
internet and call them. Chances are you will never get them. But, it will get
forwarded to the right group within the company)
Scenario 2: Trying to
reduce balance amount
You: I was looking over
my credit card statement and noticed that I still have a huge balance left. I
am going through a rough patch and am planning on skipping the payment. Is
there any way we can reduce the balance and put me in a different plan?
Company: I am sorry we
cannot do it. You know that you owe this money and delinquency will
destroy your credit score.
You: Well, I know that.
But, that is not a choice at this stage. If I become delinquent, then it will
go to a collection agency where the balance will be reduced by
50%. So, I may be able to negotiate with the collection
agency.
Company: Let me see what
we can do.
After they give their
offer – follow up with:
You: That is not enough
as it will still make my payment difficult. May I talk to your manager?
(Repeat the whole thing
again. Again, worst case scenario is to pull some Customer Service VP number from the
internet and call them. Chances are you will never get them. But, it will get
forwarded to the right group within the company)
At any point, feel free
to contact Mayanah Financial Coaching. We are here to help you!!!
