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How To Negotiate Lower Payments On Your Debt

Published June 22, 2021

8 minute read

David Ning

By David Ning

One of the reasons that debt can be such a difficult financial issue to deal with is that those interest charges keep you making payments for a looooong time. A 30-year fixed rate mortgages strangles you exactly as long as it sounds – 30 ridiculous years. That’s 360 payments you need to make, which span the majority of your entire working life. That’s without any refinances, which people routinely do to renew their 30 years of commitment. For the average American, it’s not unheard of to be in debt for most of their life. Yikes! It certainly sounds scary. That’s why I wouldn’t blame you if you want to get rid of high interest debt. With these tips, you can likely lower your debt payments and eventually eliminate it altogether. However, it will take some work. Here’s what you can do to negotiate lower debt payments.

Figure Out What You Can Pay

Your first step is to figure out what you can pay. Look at your income and expenses. Which expenses can be cut to make it a little easier to make payments? Is there a way to make a little extra money? Honestly evaluate your situation, and figure out exactly how much you can afford to pay on your debts in an effort to pay them down.

While you want to pay off your debt as quickly as possible, you also want to make sure that you are being realistic. Start small. Don’t get too ambitious about your plans, or they could turn out to be unsustainable. Creating a proper budget (and sticking to it) can be an important first step.

Call Each and Every Creditor

One of the things you can do is negotiate a lower interest rate for your loans. This is one of the best ways to manage your debt payments. If you can reduce the interest rate that your loans charges you, then more of your monthly payment will go toward the principal instead. That will help speed up how quickly the debt shrinks.

I know this sounds rather tedious. An honestly, it is. Calling your credit card or loan company to ask for a break might even seem like begging. However, this is no time to be too proud! It could save you a bundle of money over the coming months or years. It’s definitely worth the time to call and haggle, if you want to get ahead financially.

How You Handle the Call Can Make a Real Difference

So now we’ve established that you’re going to call your creditors. (You ARE going to call, right?) When you do, having a personable approach will go a long way. Make sure you are polite and explain clearly what you are hoping to accomplish. Impress upon your creditors that you have every intention of paying every cent of what you own, but your current financial situation is making is difficult. Make it clear that an interest rate reduction would go a long way towards ensuring that you never have to default on the debt.

As long as you are polite and state your case sincerely, there’s a good chance you can see a lower interest rate. This will go a long way toward helping you get rid of your debt. This tactic works best on revolving debts, like credit cards or lines of credits. You’ll have a bit harder time getting a new rate on your car or house loan with refinancing it completely.

Extend the Payback Period

One simple way to lower your payments is to extend the payment period. For example, if you have a two-year personal loan, then see if you can change it to a five-year loan. You will end up paying more interest over the long run, which is definitely bad. However, if you’re struggling with a negative cashflow every single month, this tactic can make each payment less crushing.

Use this as one of your last resorts, though. On top of paying more interest over time, longer duration loans also tend to have higher interest rates. Many five-year car loans, for example, have a higher interest rate than four-year loans. Most 30-year fixed rate mortgages have a higher interest rate than 15-year fixed rate mortgages. If you’re really up against it, financially speaking, extending the terms of your loan could be a temporary fix. But it will cost you more money in the long run.

Do You Need a Payment Plan?

If you are really struggling with your debts, it can make sense to work out a payment plan. In some cases, this might mean that you have to close your credit card account and then make regular payments. With other types of debt, such as hospital bills and other medical debts, you can usually work out a reasonable payment plan. Hopefully, it makes the whole thing a little more manageable in the long run.

Some hospitals will even give you a discount if you call. The hospital where our children were born routinely offers such concessions. As long as you call, they give you a 10% discount right then and there. You don’t even need to qualify for it. It’s as simple as making that phone call.

Settle Your Debt

Another option you can pursue is to make an offer to settle your debt. If you can pay a lump sum right now (and it’s more than the company is likely to get if you default and can’t pay at all), you might be able to pay less than you owe. In many cases, credit card issuers have already received more than what you originally borrowed just in interest payments. Settling might net them more money if you were to just keep paying, but it’s not guaranteed. Settling now assures them of more money immediately.

With hospitals, it’s sometimes possible to settle for as much as 50% of the bill if you can pay a lump sum right now. Now do you see why my local hospital was so willing to give out 10% discounts? They are sometimes happy to settle for merely a 50% discount! Find out what your options are, and then consider settlement as well as payment plans.

Consolidate Your Debt

Reducing the overall number of payments may not immediately jump out to you as a way to reduce your debt. However, having fewer total obligations can actually work really well. It’s just easier to deal with fewer payments. That alone can free your mental energy for other ways to improve your finances. Also, by consolidating your various debts into a single debt with a lower interest rate, you essentially just cut the interest rates of your most expensive loans.

It’s usually much easier to negotiate on terms when you are getting a brand new loan. Lenders are eager to bring you on a new customer. In fact, the agent you speak to may even get compensated via a commission for signing you up. That gives you a bit of bargaining power. There isn’t nearly the same incentive when you’re an existing customer, just trying to ask for a lower interest rate.

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Refinance Your Debt

Don’t forget to refinance your loans while you consolidate your debt. For mortgages, there’s something called a cash out refinance. That’s where you can take money out of your house equity to pay off other debts. Brokers may always tell you they are doing the best they can, but shop around a bit. You’ll be able to easily negotiate a better deal.

Just make sure you are getting all your quotes on the same day. Rates change daily. If you take too long to get your quotes, you won’t be able to make an apples-to-apples comparison on which loan is best. Having all your credit applications take place in a short timeframe also helps your credit score stay high.

Avoid Toxic Loans

Payday loans may seem easy but you should avoid them at all costs. You may may be paying as much as a 99% APY. These kinds of loans are incredibly expensive and super predatory. It may be obvious to some of you, but there’s still a reason that the payday loan industry is so huge. Plenty of people fall for what is essentially a legalized scam. You can find these companies dotted all over the country, especially (but not exclusively) in neighborhoods with lower average incomes. These toxic companies do huge business.

If you want to lower your debt payments, then a credit card probably isn’t the answer either. They typically charge somewhere around 20% in interest. Don’t be fooled by their “minimum monthly payment” claims. The debt will continue to grow to unpayable levels. When you are trying to consolidate loans or debts, you should favor personal loans with reasonable interest rates in the single digits. 

Seek Help If Everything is Too Overwhelming

If you need help with the math, then find a friend to help you out. Even credit counselors from places like the American Consumer Credit Counseling (ACCC) can help. Don’t try to do it yourself if the numbers are too overwhelming.

Even if you are a math whiz, a second set of eyes can always be helpful. A third party can offer more than math assistance too. ACCC, for example, can offer advice on how to deal with your debt. The best part is that it’s free. They even have a low-fee debt management service if you want more help.

Consider a Debt Negotiation Service

I already mentioned the debt management services at ACCC. There are many others. You really should give it a shot yourself first because not only is this method free but going through the process will also help deter you from going into deep debt again.

The last thing you want is to just hire someone to lower your payment and then you just slowly go right back into deep debt because you think lowering your debt is just a matter of calling a professional to act on your behalf.

Don’t Get Back into Debt

Congratulations in advance if you are able to negotiate your debt and lower your obligations. It’s really a sigh of relief when you finally feel like you are breathing above water again.

But before you put everything behind you, I want you to remember that suffocating feeling of being behind in payments. I want you to do this because that feeling will help you to never be in over your head again. You know how it feels and how much damage debt can cause. Don’t repeat the same mistake.

The Bottom Line

Trying to negotiate a lower debt payment isn’t nearly as easy as getting into debt. It’s also not as fun as spending a ton of money without care. Luckily, knocking the payment down isn’t impossible. There are many everyday people who successfully lower their obligations.

Try to do it yourself, but don’t give up even if you can’t quite get it done. Keep trying, or seek a professional who will surely be able to help you out. Just don’t overpay for their services and end up owing even more. You will be able to negotiate a lower debt payment. You just have a put in some effort. Good luck!

debt negotiations

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David Ning

Experienced Finance Writer

David is a published author, entrepreneur and a proud dad. He firmly believes that anyone can build a solid financial foundation as long as they are willing to learn. He runs MoneyNing.com, where he discusses every day money issues to encourage the masses to think about their finances more often.

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