How to Negotiate with Lenders

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Lenders may make accommodations and negotiate with you if you’re facing financial difficulties. Learn what you need to know and how to ask for relief and negotiate your options. [Duration: 2:47]


  • Some lenders may be willing to negotiate with cash-strapped borrowers to offer relief options and minimize the lender's financial loss.
  • Common debt negotiation strategies include asking for reduced interest rates, working with a lender to create a repayment plan and considering debt consolidation.
  • Talking directly and honestly with your lender may be a helpful route to debt relief. Explain your situation calmly and politely and don't be afraid to elevate your call to a manager.

If you've fallen behind on payments for your credit card or other debts, you may not think to turn to your lender for help. However, some lenders may be willing to negotiate with reliable borrowers in need of debt relief. Lenders earn money from the interest they charge on your monthly loan or credit card payments. They're also motivated to recoup at least a portion of what you owe them. As a result, they're often open to compromise to avoid their financial loss.

Debt negotiation strategies

The relief options available to you will depend on your lender and your specific financial situation. However, there's a range of negotiation strategies you might try.

  • Ask your lender to reduce your interest rate. Securing a lower annual percentage rate (APR) for your credit cards may be as easy as making a direct request to your credit card company. Borrowers who have high credit scores, a strong payment history and an established relationship with their credit card provider will generally have a better chance of approval.

    To ask for a reduced APR, simply call your credit card company and speak with a customer service representative. Don't be afraid to elevate your call to a supervisor if you think it may help your chances of approval. To bolster your argument, collect a few competitive offers from other credit card companies. Then, present these offers to your current provider during the call.
  • Ask about forbearance. Forbearance refers to a specific time period of debt relief for a loan or credit card. There are many types of forbearance. For mortgages and student loans, a forbearance agreement typically sets a specific time period during which you are not required to make payments. For credit cards, some lenders may temporarily waive interest rates and other fees.

    However, it's important to note that forbearance simply offers you more time to pay back what you owe and your debt will not be erased. Because of this, forbearance may be a good option for borrowers facing temporary financial hardship such as a sudden illness, a divorce or a natural disaster.
  • Work with your lender to create a repayment plan. Some lenders are willing to develop repayment plans to help borrowers catch up on what they owe. For instance, some credit card providers offer long-term repayment plans called hardship programs to distressed borrowers. Low-income federal student loan borrowers can apply for income-driven repayment plans that reduce monthly payments. Ask your lender what repayment options might be available for your unique situation.
  • Look into debt consolidation. Debt consolidation combines several loans or credit card balances into a single new debt, typically in the form of a debt consolidation loan, a home equity loan or a balance transfer credit card. Consolidation simplifies what you owe each month, reducing the risk of missed or late payments. It can also make repayment less expensive by combining the debts into a new loan or credit card with a lower interest rate. However, consolidation typically comes at a cost, including additional fees, interest and other payments, So be sure the benefits outweigh these expenses.
  • Ask for a reduced, lump-sum payment. In some instances of serious financial hardship, your lender or credit card provider may be willing to settle your outstanding balance for less than what you owe — provided you can offer them a large lump-sum payment. For example, if your credit card is in default and you owe $5,000 in charges and interest, you might ask to settle for a one-time payment of $3,500.

    Lump-sum payments may work for certain borrowers, but this method is not for everyone. First, lenders will generally only consider settling if your debt is already late or in default. Letting your debt get to this point can seriously damage your credit scores and remain on your credit reports for up to seven years. Second, the IRS typically considers any amount of debt forgiveness to be taxable income. If you're considering a lump-sum payment, be sure to talk to your lender about how it may impact your overall financial situation.

How to negotiate with your lender

Talking directly and honestly with your lender may be a helpful route to debt relief. But before you contact your lender, you'll need to prepare. Building a debt repayment budget can help you assess your options: What can you afford to pay, if anything? Which relief options are you prepared to ask for?

Another key to successful negotiation is maintaining a record of on-time payments. Good credit scores and a history of responsible credit use may also help your case.

Before you call to negotiate, gather relevant records to help explain your debts accurately. When you do contact your lender, explain your financial situation calmly and politely. If necessary, ask to speak to a manager. Be sure to get any agreements for debt relief in writing.

If you're denied at first, don't be afraid to call again. If you've previously been turned down for reduced interest rates, a debt settlement, a forbearance agreement or another kind of relief, you may qualify in the future if you're able to establish reliable credit habits.

Although hammering out an arrangement with your lender isn't always easy, doing so can help you dig your way out of burdensome debt. If you take a leap and talk to your lender, you stand to gain a better handle on your finances.

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