Negotiating with creditors

You have more leverage than you think

Most people never call their creditors. They assume the rate on the statement is fixed and customer service can't help. Both wrong.

Credit cards, hospitals, even the IRS have hardship programs. They'd rather reduce what you owe than lose all of it to default. Your job is to ask.

Ten minutes on the phone can save thousands. Here's how.

Key points

• Ask for a lower rate first. Call and say "I've been a customer X years. Can you lower my rate?" Many drop 3 to 5 points on the spot.
• Request a hardship program. Most big lenders freeze interest for 6 to 12 months with documented hardship. Ask for "the hardship department."
• Settle older debt for less. Debts in collections often settle for 30 to 50% of the balance. Always get the offer in writing before paying.
• Settlement hurts your credit. It shows as "settled for less than full amount." Better than a charge-off, worse than paid in full. Know the tradeoff.