Negotiating with debt collectors is a tough pill to swallow, but especially for young adults building a nest egg and trying to establish good credit. These are especially difficult times for them considering the high cost of a college education, real estate and autos.
Millennials are up to their ears in debt according to a research memo released by global banking and financial services giant UBS. Strategists Stephen Caprio and Matthew Mish wrote that Americans 21-to-34 year of age hold $1.1 trillion of the $3.6 trillion in outstanding US consumer debt. They also believe Millennials face the greatest risk of defaulting on their loans among all US age groups.
While the specter of default is no man’s land for people of all ages, there is still time for Millennials to take action before falling deeper into debt if their delinquent account is being managed by a best-in-class debt collection agency.
Experienced debt collectors find solutions for consumers that encourage them to engage in the repayment process and remain loyal to the brand. These collectors have a toolbox full of ways to help debtors willing to begin a repayment plan.
If contacted by an agency, Millennials should quickly roll out a two-part strategy: (1) stop financial hemorrhaging by cutting expenses; and (2) negotiate a deal.
Cutting Overhead
Spending less is rarely welcomed by most people, but it can have a huge impact on ability to repay debt, especially if they look outside the box. As difficult as it is for consumers to accept, saving money by cutting expenses is a popular topic for the experts. For example, a search of “ways to reduce expenses” returns a whopping 81 million web-page results.
“40 Ways to Save Money on Monthly Expenses” is an excellent place to start. Author Trent Hamm even breaks down the subject to subcategories such as transportation (use public), energy bills (install a programmable thermostat), entertainment (small cable packages), food (dine at home), insurance (higher deductibles), and miscellaneous (stop buying cloths, kick the Starbucks habit or downsize housing).
There are also credit counselors who can conduct a free analysis of consumers expenses with the hope of finding ways to save them money. This is such an important strategy that the US Department of Justice maintains a searchable online database.
Ways to Lower Debt
“Any time you can reduce how much money you owe it will help lower your ongoing monthly expenses,” said Hamm. “For starters, paying off debt means fewer monthly bills to pay, leaving you with more money to save.” His suggestions for cutting debt include:
- Refinancing home and/or automobile
- Consolidating student loans
- Utilizing balance transfers
- Requesting credit card rate reductions
- Applying for automatic debt repayment plans — Installment plans offer an interest rate reduction if borrowers sign up for automatic monthly billing.
Negotiating a Deal with Debt Collectors
Experienced debt collectors spend their work week encouraging consumers to begin a repayment plan (see our related article, “The Profile of a Successful Debt Collector“). They are also tough negotiators with an arsenal of ways to overcome objections.
Depending on the client, situation and time of year, debt collectors may be amenable to waiving late fees, deferring one or two payments or lower interest rates. They may also be authorized to reduce loan principals via “debt settlements.”
“10 Tips for Negotiating with Creditors” (May 2017) offer several suggestions for establishing professionalism with seasoned debt collectors. “The person on the other end doesn’t want to hear all the details about why you’re not able to pay your bills,” wrote Gerri Detweiler, “but they do need to know if you are in a hardship situation and what you are trying to do to get back on track.” Suggestions include avoiding drama, asking questions, taking notes, reading and saving mail, getting written agreements, and knowing what one can afford.
Reaching Out to Debt Collectors
“Fielding calls from debt collectors may be the least favorite part of your day,” wrote Kathryn Tuggle, “but handling them strategically may be the most important thing you do all year.”
Her article in The Street, “7 Ways to Convince Debt Collectors to Settle for Less Than What You Owe,” suggests consumers should take the initiative by reaching out to collectors. Tuggle offers testimony from William Walder, a New York City bankruptcy attorney.
“Call them every day and ask them over and over again for what you want. Tell them you want to settle, and give them a number,” said Walder. “These people are good negotiators, but they aren’t used to someone calling them.”
The concept of consumers being open to negotiating with debt collectors — or even initiating it — is a relatively new space for the industry, but it presents an opportunity for debt collection agencies and consumers to finalize a deal that satisfies clients. Debt collectors are ready and willing to play “let’s make a deal,” but consumers need to do their part by meeting them in the middle.
Clients seeking a best-in-class agency should contact Optio for a free consultation to learn about an individualized collection strategy and the company’s team of experienced debt collectors.
