There are three simple rules to follow when dealing with creditors.
1. Communicate, communicate, communicate
It is best to run toward your creditors, not away from them. As hard and embarrassing as it may be, always take the initiative in keeping your lenders informed. It is almost impossible to negotiate with a creditor you have ignored. Communicating with a creditor sooner rather than later tells them you are responsible and serious about resolving the problem. They document each contact you make with them, whether it is by phone, letter, email, or fax. The more you communicate the better. Silence is deadly.
2. Offer Lenders a Written Plan.
Most creditors respond best to a request that is backed by a written copy of your budget, a list of your debts, and your proposed repayment plan indicating how much you are able to pay each month. It is important to present a realistic plan, yet to demonstrate you are will to make sacrifices to pay the debt.
I recommend a cover letter similar to the one below when first communicating with a creditor. You can tailor it to each lender, but putting something in writing is the key.
Dear Sir or Madam:
I am writing to you about my account _________. I am sorry that I have failed to abide by the terms of our agreement. I am committed to full repayment of my debt.
Attached you will find my current budget and a list of my debts. As you can see, my debt totals $______ and my monthly payments $_____.
My present monthly income of $_____ less my taxes and expenses leaves me only $______ to pay toward my debts.
I have received assistance in assessing my financial situation to determine what I can afford to pay my creditors at this time.
Enclosed please find my check for $______. I will be able to pay this each month for the next ____ months. After that time, I will review my finances and may be able to increase my payments.
Also, I respectfully request that the interest rate you are charging be reduced so a greater portion of my payment may go toward principal reduction.
If you are unwilling to accept my proposal, please return the enclosed payment. Contact me at __________, if you have any questions.
Thank you in advance for your help in this matter.
3. Exercise integrity
When you communicate with your lenders, always be completely honest. The Bible repeatedly stresses the importance of honesty. Leviticus 19:11 says, "You shall not steal nor deal falsely, nor lie to one another." Proverbs states, "The Lord loathes all cheating and dishonesty" (TLB).
Remember, the Lord loves and cares for you. He wants the best for you. Your honesty gives the Lord maximum freedom to work on your behalf.