Sometimes people get into all kinds of financial trouble and don’t know what to do about it, but they never think of the most obvious solution. If you owed money to a friend and needed a bit more time to pay them back you would just talk to them, but people rarely take the same step with a formal creditor like a bank or credit card company. Sure, those creditors want to get paid back on time, but they would much rather get paid back a little slower than not at all, so they are willing to work with you of you let them know the problems that you are having and you are honest and you offer solutions.
There are two types of past due debts – those that have gone to collection and those that haven’t. We will look at each and how to deal with them.
If the debt hasn’t already gone to collection, then you can often make a difference by talking to the creditor, but it could take some patience. You might not succeed in your first call, but by continuing to call and explain what you are trying to do you will eventually end up speaking to the right person. The steps they will often be open to include lowering the interest rate, lowering the monthly payment or suspending interest for a time. Just remember that you have to be willing to pay something and to work with them or they won’t be willing to work with you. Also, when you are dealing with the companies, you will want to, at all times, be honest, open and very, very polite. They don’t have to help you, but they certainly can if you make them want to.
If the debt has already gone to collection you are going to face a hit to your credit rating no matter what, but that doesn’t mean that you can’t improve your situation dramatically. The collection agencies are a business, so they are interested and motivated to collect something from you. Try to negotiate a lump-sum payment or a payment plan with them. You will still have a collection on your credit report, which will stay there for seven years, but at least you will have paid it off. Be sure that the collection agency reports your deal to the credit bureaus so that it can be noted on your credit report. This will look better to lenders.