How to talk to your creditors when you need help with Debt

I need help with debt! – What to tell your creditors when times get tough

3rd September, 2015, No Comments

Picking up the phone and asking for help can be one of the most difficult things to do, especially when you owe money to the person on the other end. It is tempting to just ignore the problem in the hope it will all go away, but ignoring your debt is a one way ticket to bankruptcy.

People will often turn to credit cards and payday lenders to find quick cash to cover the debts they can’t pay. But going further into debt to repay your unaffordable debt will create a never-ending spiral of insolvency.

If you get a bill in the mail you know you can’t afford or if you have fallen behind on your regular repayments, the best thing to do is pick up the phone and call your creditor. Being proactive about your debt gives you the best chance at overcoming this bump in the road. More often than not, your creditors will allow you to reduce your payments for a period of time until you get back on your feet.

If you want to take control of your debts by calling your creditors, we have put together a complete guide on what you need to know, what you need to say and what you need to do when telling your creditors “I need help with debt!”

  1. Know your financial situation

Before you call your creditors, you need to understand your financial situation. You’ll need to know how much you can afford to offer your creditors to settle your debts without leaving yourself short. You can figure this out quite easily by making a budget.

Write a list of your regular financial obligations. This includes groceries, petrol, internet, clothes, school fees, entertainment, etc. Then do the math to find out how much money needs to be set aside from your income to cover these expenses. With any luck, you will have some money left over which you can dedicate to your debt repayments. Now write a list of your debts, including how much you owe, your repayment amount, the repayment frequency and the creditors name.

Now you can allocate money to these debts. Secured debts, such as your mortgage and vehicle finance should take priority then divide the surplus from your budget amongst your debts. This will give you a realistic figure to offer your creditor without leaving yourself short for essential expenses, like petrol to get to work.

If you get to the end of your budget only to find you don’t have any money left over to repay your debts, you need to take action immediately. Go through your budget again and look for expenses you can cut back on. Things like pay TV, gym memberships, eating out, magazine subscriptions, alcohol, cigarettes and supplies for hobbies. These adjustments to your budget don’t have to be permanent, just until you get back on your feet.

If there is no room to move in your budget and you can’t afford your debt repayments you are insolvent. Your creditors could place a default or judgement on your credit file, take possession of the assets acting as security for your loans, such as your vehicle or home or in extreme cases, place you into Bankruptcy. If you are concerned about you options after completing your budget you can call 1800 00 3328 to speak to one of our Case Managers for a free, no obligation chat about your finances. We can review your financial situation and inform you of your options. We might even be able to give you a plan to improve your finances and get out of debt!

  1. Plan your proposal

Summarise your debt position. Your creditor will need to know the reasons why you are in debt and why your repayments are no longer affordable. Debt can be caused by a number of reasons, including job loss, relationship breakdown, medical procedures or injury. Write down a short paragraph about how you fell into debt. Keep it short and to the point.

What’s your solution? Now you have explained the problem, offer a solution. Refer to your budget and know exactly how much you can offer without leaving yourself short. Are you in debt because you lost your job but you are currently looking for work? Ask to pay your budgeted amount for the next 3 months to allow yourself time to find a new job. Are you in debt because of an unexpected and ongoing medical issue? You can propose to pay your budgeted amount off the principle and freeze future interest. Your creditor may have their own ideas about what solutions they can offer, so try to be flexible with your proposal.

Offer supporting documents. Look for supporting documents such as medical certificates, bank statements, redundancy paperwork or anything which will support your proposal. Offer to send through all the documents you have available to give credibility to your case.

  1. Make the call

This could be one of the most nerve wracking calls you have ever made, but believe it or not, your creditor will be happy to hear from you. They would much rather know you are struggling with your repayments and taking the steps to rectify the situation than dodging their calls and falling deeper into debt. Take a few deep breaths and make sure you have your notes in front of you. You are most likely to get an administration, customer service or sales representative on the phone when you call so make sure you get the right person on the phone. Explain to whomever answers that you are having trouble making repayments and would like to speak to someone about a hardship arrangement. They should put you through to the right department.

While this call is difficult and you are nervous, try to remain, friendly and calm – good rapport is vital for ongoing communication. Take note of the name and job title of the person you are speaking to for future reference. Once the conversation begins you can fall back on your call notes to stay on track, identify the problems and put forward your solutions. While you are on the call remember:

  • It takes two to get out of debt. While you have carefully planned your call, this is still a two way conversation and your creditor might throw a few spanners in the works. Keep an open mind, listen to what they have to say, ask all the questions that come to your mind and write everything down. You may have to enter negotiations with your creditor before you can reach a mutually beneficial agreement so try not to get lost in the jargon. If you aren’t sure about something they have said, ask them politely to explain it again.
  • Be honest and open. There can be serious legal ramifications if you lie about your financial situation. Let your creditor know you have made a mistake, you are having a hard time and you want to honor your agreement, but you need a little wriggle room. Exaggerating your story won’t increase your chances of success.
  • Leave your emotions at the door. When you are stressed about debt this is a lot easier said than done, but it will help you in the long run. Getting upset, agitated, aggravated and crying aren’t productive to the conversation and can even put an end to any form of negotiations. Try to remain calm and focused on the end result. Always be courteous to your creditor and speak to them how you want to be spoken to.
  1. Follow Up

After the call, follow through with any actions you discussed on the phone. If you offered to send supporting documents or make an initial repayment, do it straight away. If you were given an email address to send something through to, in the body of the email write a quick summary of everything you spoke about on the call. It can start like this:

Hi (representative),

Thank you for taking the time to speak to me in regards to a financial hardship agreement. As discussed on the phone please find attached the supporting documents I promised to supply. Below is a summary of points discussed on our call.

  • I am in financial hardship due to…

  • I proposed to pay…

  • You offered me an arrangement in which I pay…

This way, you are officially recording points discussed in the phone call in case you need to refer back to them later. It is also giving your creditor a chance to follow up and clarify any points you may have misunderstood.

If your creditor is unable to offer you a hardship arrangement or if you continue to struggle financially, even with a new agreement in place, it might be time to call in the experts.

Why we care

At Debt Rescue, we understand how difficult it can be to reach out to your creditors and say “I need help with debt”. We also know how daunting it is to enter negotiations with creditors about financial hardship. How do we know? Because we do it every day.

Our caring team of Case Managers make it their mission to relieve you of the stress associated with debt by doing all the hard parts for you.

We take the time to get to know your financial situation and learn about the circumstances which brought about your debt. From there we will work with you to plan a budget and tailor a personalized debt relief solution just for you. We deal with your creditors, so you don’t have to and you are left to pay off your debt in peace.

Good luck!