How to Negotiate Credit Cards and Debt with Collectors

Elizabeth Johnson

Financial Advisor
Updated: 07/2019

How to Negotiate Credit Cards and Debt with Collectors

Every gets into some kind of debt at some point. Whether you’re using debt responsibly or have found yourself in over your head, one of the best ways to lower your debt is through negotiation. Many people don’t think about the fact that companies that deal in debt are businesses. That means you can always attempt to negotiate a better business deal for yourself and for them.

This article will cover everything you want to know about debt negotiation. We’ll go over the benefits of debt negotiation, discuss the different ways to negotiate with creditors, and your different options for debt negotiation. After that we’ve got a helpful FAQ that will answer all of your debt negotiation question. Use this information to keep more of your hard-earned money and lower your debt today!

In This Article

Benefits of Negotiation with Creditors

There are several benefits to negotiating your debts with creditors. The primary bonuses are:

  • Pay Less than you Currently Owe
  • Protect your Credit Score
  • Avoid Collections Agencies Hassling You
  • Lower Monthly Payments
  • Lower Fees
  • Return Account to Good Standing

Debt negotiations with creditors can make all of these things happen. It’s important to be proactive if you want to obtain these benefits. Once the debt has been sent to a collection agency you won’t be able to negotiate directly with your creditors. Also, your credit score will likely take a hit, as most companies report these charge offs.

All of this means that you need to take the necessary steps to initiate debt negotiations with your creditors. That means you’ll have to call them or hire someone to negotiate on your behalf.

However, the benefits to doing so are huge. You can avoid derogatory remarks on your credit report. You can also reduce the amount that you owe. Some companies will offer lower interest rates. Others will waive certain fees. Sometimes they’ll even remove past comments about late payments from your credit report, instantly boosting your score.

How to Negotiate with Creditors

The important thing to remember is that any debt negotiation is a business transaction. As long as you can explain why it makes sense for the business to lower your debt you’ll be in good shape. There are essentially two approaches to negotiating with creditors. You can attempt to reduce your debt, or you can attempt a debt settlement. Either way you’ll pay less overall.

A debt settlement is when you agree to pay your creditor a lump sum of money and they consider your debt fulfilled. There’s a few things you need to be wary of when attempting this. We’ll discuss it more in the next section.

Negotiation to reduce your debt is a bit different than a debt settlement. This involves trying to get lower interest rates. You can also try to get them to waive fees. You’ll still be making monthly payments. However, your monthly payments will be lower, and you’ll be able to stay current on your account. Negotiating to reduce your debt is more likely to be successful than attempting a debt settlement.

How to Negotiate Credit Cards and Debt with Collectors

How to Negotiate with Creditors for Debt Settlement

In order to secure a debt settlement, you’ll need to prove a few things to the company. Most companies will only consider a debt settlement option under extreme circumstances. The things you need to prove are:

  • You won’t be able to make your monthly payments for a long time, possibly ever
  • You have access to a lump sum of money to give them in the settlement now
  • The money you have can only be used for debt settlement

Companies are in business to make money. If they settle debt, they’re making less money. That means they’ll always prefer you continue making monthly payments.

However, if you show that you won’t be able to make payments anymore, then they’re not going to get any more money from you. The tricky part comes with proving that you have a lump sum of cash on hand for debt settlement that can’t go towards your monthly payments.

Most people use a debt settlement company for this. The company takes payments from you and holds them in an escrow account. You won’t have access to this account at all. They also tell you to stop making payments to your original creditor. Once your account has enough money for a settlement, the company will use it on your behalf to settle the debt.

Sometimes people do this with family members or friends. They might offer a lump sum, but only if that lump sum is used to settle a debt. This can be another way to achieve the hardest part of debt settlement negotiations.

How to Negotiate with Creditors to Reduce Debt

On the other hand, most companies will be willing to negotiate with you to reduce your debt in some way. That’s because they want you to keep making payments until your balance is paid off. Therefore, they’ll be willing to give a bit in order to help you continue making payments. So when trying to figure out how to get out of debt put this technique at the top of your list.

The most common debt reduction negotiation target is interest rates. Interest rates are how the company makes money by lending to you. Therefore, if a lower interest rate will let you make your payments on time, then a company will take less profit in order to get predictable cash flow.

Additionally, most companies will waive fees to help lower your debt balance with them. Usually fees are a sort of extra money for the company. If getting rid of outstanding fees will allow you to make payments, the company knows they’ll earn more from your payments than the fees.

The best way to negotiate a debt reduction is to explain to your creditors why you need your debt reduced. Tell them if you’ve lost your job, had medical problems, a family emergency, or whatever is preventing you from making your payments on time.

You should be prepared to tell your creditors about your outstanding debts with others. They’ll want to know how much you pay for your mortgage or rent. They’ll also ask about other essential charges and expenses like food, electricity, gas, etc. Having these details prepared will allow you to show them why you only have so much money in your budget to make payments. As a result, they’ll be more willing to work with you to keep payments going.

Ways to Negotiate Debt with Creditors

You have two primary options when it comes to negotiating with creditors. You can try to negotiate yourself or you can hire a debt negotiation company. Each method has its own benefits and drawbacks.

Negotiate Debt Yourself

The benefits of negotiating debt yourself are:

  • More control over the process
  • Better understanding of your financial situation
  • Faster response to changes in your financial situation
  • Don’t have to pay for debt negotiation services

However, there are some drawbacks to negotiating debt yourself. Specifically, some people may not be familiar or comfortable with business negotiations. They might also not understand how to go about the process of negotiating. Other people might be worried they won’t get as good of a deal. If these concerns describe you, then a debt negotiation company is your best option.

Hire a Debt Negotiation Company

There are also benefits to hiring a debt negotiation company. They are:

  • Experience with debt negotiations
  • Understand the debt negotiation process
  • Easier to negotiate for a third party – not emotionally involved
  • Realistic expectations of the outcome

Debt negotiation companies are professionals. That means they’ll know who to contact in the company. They’ll also know what you should expect from the process. A debt negotiator can help you decide if debt settlement or debt reduction is best for you.

If you decide to hire a company to help negotiate your debt they’ll ask questions about your income, debts, and expenses. They’ll use that information to negotiate on your behalf.

There are a few drawbacks to using a debt negotiation company though. They aren’t going to be able to quickly respond to changes in your financial situation. They also cost money. Most companies charge a percentage of the money they save you on your outstanding debts. That means you’ll wind up saving less money than you would have if you negotiated for yourself.

How to Negotiate Credit Cards and Debt with Collectors

Debt Negotiation FAQ

This section covers all of the questions you have about debt negotiation and negotiating with creditors. We’ll cover general debt negotiation, help you understand debt negotiation companies, how debt negotiation affects credit, negotiating with credit card companies, and negotiation other kinds of debt.

General Debt Negotiation

This section covers all of your questions about general debt negotiation. Use it to get a good foundation before you more on to the other sections with more specific questions.

Can I Negotiate with Creditors?

Yes, creditors are businesses. You can always negotiate a business deal with a company. Keep in mind that the companies aren’t obligated to anything other than your original deal. That means you can always try to negotiate, but the creditor may not be willing to.

Why Would a Creditor Negotiate a Lower Rate?

A creditor would negotiate a lower rate because it will help ensure they get their payments on time. Business, especially financial business, thrives on predictability. A company is usually willing to take lower profits if it means they get regular payments.

Is it Worth Negotiating with Creditors?

For many people, yes. Especially if you’re having a hard time paying your bills. You need to carefully plan your budget so you can understand what you can afford to pay each month. That will help you in your negotiations.

Does Calling to Negotiate My Debt Change Statute of Limitations?

It doesn’t change that statute itself. However, if the call acknowledges that you owe the debt it can restart the amount of time that a creditor can legally try to collect the debt. You should talk to a lawyer or debt collection specialist before contacting any companies about very old outstanding debts.

Can I Negotiate for Someone Else with their Creditor?

Yes, you can negotiate for someone else. That’s essentially what debt negotiation companies do. You might have to provide proof that you’re authorized to talk with the creditor about someone’s account.

How Far Down Should I Negotiate Debt?

As far as you can! That helps you save the most money. You’re unlikely to negotiate a debt down to zero, however you should keep in mind that a business will always take some money compared to no money.

Can I Threaten Bankruptcy to Negotiate a Debt?

Yes, you can. However, a better approach might be to say that you won’t have any other choice but to declare bankruptcy if a creditor won’t work with you on your debt. This will work better than threatening them with bankruptcy.

Is Negotiating a Credit Card Debt the Practice of Law?

That’s a tricky questions and it depends on several things. You’ll want to check with a lawyer in your jurisdiction. Generally it won’t be, however that depends on the factors involved.

What is Non-Negotiable Documents in Letter of Credit?

Non-negotiable documents mean that the person in question has to be the one that picks up goods that are purchased on credit from shipping companies.

Debt Negotiation Agencies

This section covers all of the info that you want to know about debt negotiation companies. Use this information to make an informed choice about whether or not to hire a company to help you negotiate with your creditors.

Is there an Agency that Can Negotiate My Debt?

Yes, there are lots of debt negotiation companies. You can check online or you can look for local companies. Most credit card debt relief companies offer debt negotiation. Alternatively you can consolidate credit card debt and make easier payments.

What Is Debt Negotiation Program?

A debt negotiation program can be several things, but it usually means that you stop making payments to your creditors and pay the debt negotiation company instead. The company then uses this money to negotiate a debt settlement with your creditors.

Which Are the Best Credit Debt Negotiation Agencies?

There’s no one answer to which debt negotiation agencies are the best. The best negotiation company is the one that can do the most for you for the smallest fee. Ask around different companies to see what they’ll offer you.

What Do Debt Negotiators Do?

Debt negotiators work with you and your creditors to lower or settle your outstanding debts. They’ll also help make sure that the new agreement is clearly understood and enforceable be both parties.

Do Debt Negotiation Companies Work?

Yes, debt negotiation companies can help you lower your monthly payments or reach debt settlements with your creditors. Check reviews of specific companies to ensure you’re working with the best choice for you.

Are Debt Negotiation Companies Legitimate?

As an industry debt negotiation is legitimate. However, some companies are better than others. Make sure you research your options before signing up with a specific company.

Should You Hire a Debt Negotiator or Do it Yourself?

That depends on several factors. Most importantly, how comfortable are you with negotiating business deals? If you’re comfortable and have time, do it yourself. Otherwise, it might be better to hire someone.

Should I Apply for a Credit Card with Debt Negotiation?

You almost certainly won’t be able to. Most debt negotiation programs put a freeze on your credit report. That means your application won’t go through because companies can’t check your report.

How to Negotiate Credit Cards and Debt with Collectors

Debt Negotiation and Credit

Debt and credit are intrinsically linked. This section helps explain how debt negotiation can affect your credit score. Use this information to decide if debt negotiation is right for you, and to do it in a way that preserves your score.

Does Negotiating Debt Affect Credit?

Negotiation your debt can affect your credit. If you settle your debt and the company reports that the debt was settled for less than owed, then your credit score will go down. It’s always smart to make not reporting the settlement part of any debt negotiation agreement.

Does Negotiating Credit Card Debt Hurt Your Credit Score?

Sometimes. If it brings your accounts to current then it can help your credit score. However, you should try and make not reporting damaging remarks part of any debt negotiation.

What Happens to Your Credit if You Negotiate with Payment?

It depends on the outcome of the negotiations. A debt settlement can lower your credit score. Reducing your debt through negotiations probably won’t hurt your score. Instead you’ll be listed as paying as agreed.

How Does Debt Negotiation Affect Credit Scores?

That depends on what happens in the actual negotiations. Try to include protections in any agreement. There are very few industries that are required to report to credit reporting agencies.

Credit Card Debt Negotiation

Credit card debt is the third largest source of debt in the country. It’s also one of the types of debt with the highest interest rates. This section answers your questions about negotiating with credit card companies about your debt.

Can I Negotiate Debt with Credit Cards?

Yes, you can negotiate debt with credit card companies. This is just one way to pay off credit card debt sooner. However, the company isn’t legally obligated to cut you any new deal. Therefore, you’ll want to make sure you have a compelling reason why it’s in their best interest to work with you.

Can You Negotiate Your Credit Card Payoff?

Yes, you can negotiate your credit card payoff. Be sure that you get an agreement from the company not to report the debt as settled for less than owed to protect your credit score.

Should I Negotiate My Credit Card Debt?

That depends on your situation. If you’re having problems making your credit card payments, then it might benefit you to negotiate your credit card debt. The worst they can say is no and your situation hasn’t changed.

Do Credit Card Companies Negotiate Payoffs?

Sometimes. You’ll need to check with the specific company. One good tip is to always ask to speak to a supervisor. The higher up you get in the company, the more authority the person has to agree to negotiations. Ultimately, all credit card companies are businesses.

Is it Smart to Negotiate Credit Card Payoff?

If you think that you can negotiate a better deal for yourself without hurting your credit score too much or at all, then yes, it is smart to negotiate your credit card payoff.

How Much Can You Negotiate on Your Credit Card Balance?

That depends on many factors. These include how much you owe, how much of what you owe is in interest, whether you’re offering to make payments again or a settlement, and more.

Can I Negotiate a Lower Credit Card Balance Transfer?

Sometimes. Most companies are fairly set in stone about the terms they’ll offer for things like balance transfers. However, you can always ask. The worst they can say is no deal and you’re not out anything for asking.

Will Credit Cards Negotiate Balance?

Frequently yes. However, you’ll need a good reason why they should negotiate your balance. You also might need to move a few levels up in the company with who you’re talking to.

Can Consumers Negotiate with Credit Card Companies Directly?

Yes, the account is in your name and there’s no restrictions on talking to the company. Whether or not the company will be willing to work with you depends on other factors.

Can You Negotiate Your Credit Card Debt Yourself?

You can negotiate the debt yourself. After all, the original agreement was between you and the credit card company.

Can I Negotiate with My Credit Card Company?

You are allowed to attempt to negotiate with your card company. However, there’s no way to guarantee that the company will work with you.

Can You Negotiate Interest Rates with Credit Card Companies?

Yes, you can certainly negotiate interest rates with companies. You’ll usually get better results if you have a history of on-time payments. That shows you’re a lower risk and so deserve a lower rate.

Can You Negotiate Credit Card Annual Fee?

Yes, you can negotiate about your credit card’s annual fee. Most companies will waive the fee if you call them and have a history of on-time payments.

When Negotiating Credit Card Debt Will They Take Spouse Savings?

They’ll accept spouse savings as payments. However, they can’t seize your spouse’s savings unless they are also a holder on the account.

Can I Negotiate a Lower Credit Card Balance?

Sometimes. It depends on your credit card company and your reasons for needing a lower balance. Most companies will work out new payment terms with you if you’re having a hard time making payments.

Is it Possible to Negotiate a Higher Initial Credit Limit?

It’s possible but difficult. Most companies set their initial limit where it is for a reason. You’ll need to explain why you need and deserve a higher credit limit in order to be successful.

How Long Does Settlement Negotiation Take for Credit Card Debt?

That depends on lots of different factors. Credit card companies are usually very busy. Also, if you hired a debt negotiator, they likely have more than one customer. You should check with your creditor and negotiator for more information.

Should I Negotiate Credit Card Debt or Wait 7 years?

That depends on lots of factors. If you’re going to be applying for credit or loans in the next 7 years, then it’s probably best to negotiate the debt. A financial advisor or debt specialist can help you make the best choice.

Can You Negotiate with Credit Cards Processors?

Yes, you should point out the volume or sales or the high value of your sales to get a lower credit card processing rate from your credit card processor.

How to Negotiate Credit Cards and Debt with Collectors

Negotiation Debts with Companies Other Than Credit Cards

Credit card debt isn’t the only kind of debt. This section answers questions about negotiating with organizations that aren’t credit card companies.

Can You Negotiate with Credit Collection Agencies?

Yes, credit collection agencies will almost always work with you. They paid less for your debt than its value, so they have room to maneuver on your payment.

Can I Negotiate My Tax Debt with the IRS?

Usually, the IRS has several programs for dealing with tax debt. You’ll need to talk to them and/or a lawyer directly for more information.

What Are the Options for Negotiating Tax Debt?

There are several options for negotiating tax debt. However, it’s best to get advice from a qualified tax attorney because tax debt is a matter of law.

Can You Negotiate with Debt Collectors?

Yes, debt collectors will negotiate with you. They likely paid a fraction of what your debt is worth for the right to collect it. That means they’ve got a lot of room to negotiate and still make a profit.

Will a Mortgage Company Negotiate Down Debt?

Sometimes, it depends on what you’re specifically asking them to do. You should contact your specific mortgage lender for more information.

Can I Negotiate My Student Loan Debt?

Sometimes. Most student loan companies will put you through different federal repayment programs before they negotiate the overall balance on your debt.

Can a Lawyer Negotiate Student Loan Debt?

Sometimes, student loan debt is more complex than most debts. You’ll need to talk to a lawyer about your specific situation for more details.

Can I Negotiate Debt with Bank?

Yes, banks are businesses. That means you can talk to them about different ways to handle your debt situation. Be prepared to show the deal you offer works out in the bank’s best interest.

Can Executor Negotiate with Creditors of an Estate?

Usually. There are some obligations an estate has. An estate lawyer can help you understand what your options are. Most are even willing to do the negotiations.

Can You Negotiate Medical Debt?

Yes, you can negotiate medical debt. Most companies will set up a payment plan, lower payments, or take a settlement to get paid.

Elizabeth Johnson


Elizabeth is an expert on Debt Consolidation as she provides helpful advice to people who are dealing with debt problems. She graduated college with a BS in Finance. After college, she took a job working at a non-profit debt counseling program. It was at this position where Elizabeth honed her expertise for helping people understand how different financial products work and finding ways to help people pay off their debts.

 

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