Insider Tips: How To Work with Your Creditor to Adjust Payment Terms
January 21, 2025When you’re having trouble making payments on your debt, you may feel like throwing in the towel and ignoring the bills and calls. That’s understandable, it’s a lot of work to figure this out. However, in the long and short term, it’s worth it to stay on top of things. Here are some tips to work with your creditors to help you stay afloat with as little damage to your long-term financial wellness as possible.
Be proactive
Contacting your creditors BEFORE you miss a payment is a best practice that’s often skipped. We often hear people are afraid that if they tell a creditor that they are having trouble that the creditor will require them to pay everything back right away; but that is typically the opposite of what happens. At the end of the day, the companies you owe money to want to be paid back – it’s in their best interest to help you make that happen, even if it means that it takes a little longer than the original plan.
Requesting a payment holiday
If you just need a little grace for a month and you’ve otherwise been on time with your payments, most creditors will grant you a “payment holiday,” meaning you can skip a payment without penalty. You’ll still pay interest on the amount of the skipped payment, which is the downside, but if taking a month off will help keep you afloat, it’s better than not paying. The most important thing to know about this is you have to ask.
Giving yourself a payment holiday by just skipping a payment without notifying your creditor is a late payment, and usually comes with a fee and often an increase in your interest rate. After a certain number of days, they can report the skipped payment to the credit bureaus, which will hurt your credit score for years to come. You’ll still owe the interest, so it’s best to ask. If you’ve already missed a payment, it still can’t hurt to call and ask about your options.
Tell the truth and stick with your story
You don’t have to give them all the details, but it’s helpful to tell the truth:
- “My overtime got cut and we are in the process of making adjustments, but we don’t have any money to pay this month.”
- “I was out of work last month due to a back injury, and I’m trying to get caught up.”
- “The interest rate increase has made it impossible for me to keep up.”
Ask for your options and take notes
Different types of creditors may offer different options, so make sure you take notes on what you’re offered.
Mortgage payment adjustments
If you find yourself unable to make mortgage payments due to loss of income, you can ask for an application to modify your loan. There’s paperwork involved, but if your situation is long-term, a loan modification can keep you in your house with a more affordable payment.
Auto loan adjustments
You may not be able to modify your car note (although it’s worth it to ask), but you can usually request that your payment due date be changed to work better with your cash flow. Resist the urge to just mail in your keys – you’ll still end up owing the difference between what your car is worth and what you owe. If your credit has improved, you may benefit from refinancing your car note.
Student loans
If you have federal loans, look into different repayment plans to lower your payment. Private loans may be more challenging to negotiate, but many lenders will give you a few months’ grace period if you’re out of work and can’t pay.
Credit card debt adjustments
Beyond requesting a payment holiday, you may be able to request a change to your payment date if that will help with cash flow. You may be offered a debt settlement by your credit card company. Keep in mind that settling a debt for less than the total balance will lower your credit score, but if doing so can help you avoid bankruptcy or having the account go to collections, settling it is the preferable route.
Get everything in writing
While most of these techniques involve making a phone call, make sure you get any new agreements in writing before you act. Take detailed notes of your phone calls, including names or ID numbers of agents you speak with, as well as the specific terms you are offered. Also request confirmation in writing via email or regular mail. This will help you to ensure that the new terms are in effect and will also serve as proof if any creditors try to walk back their offers after the fact.
Consult a credit counselor if you feel you’re in over your head
If you find that this is too much to handle, The National Foundation for Credit Counseling (NFCC) offers free consultations and low-cost debt management plans– the counselors will basically do all of the above on your behalf. Be aware of anyone who suggests you stop paying or requires you to start paying them instead. Any company that reaches out to offer you debt settlement services or with promises of wiping debt out is likely to harm your finances more in the long term, even if they can offer short-term relief. Counselors through NFCC can help you understand the legal options available to you and make sure you aren’t taken by a scam that will make things worse.