Print
(From the Financial Literacy Blog) – Whether someone is looking to finance a purchase, request an increase to credit limits, adjust repayment dates, or even seek temporary relief or alternative arrangements, it’s likely that everyone will need to communicate with a creditor at some point. If someone is dealing with a credit card issuer, student loan provider, financial institution, landlord, utility company, or any other creditor, open and clear communication can have a significant impact when it comes to navigating financial challenges. Here are some tips people can follow to communicate effectively with creditors:
Understand Their Financial Situation
Before someone reaches out to a creditor, it’s important for them to have a clear understanding of their financial situation. They should have already attempted to balance their monthly budget by analyzing their income, expenses, and outstanding debts. Doing so can help them identify any challenges they are facing. Having a full understanding of their entire financial situation—beyond just their situation with that specific creditor—can help when it comes to determining a solution. For example, if the person knows how much income they can count on each month and how much will need to be set aside for monthly living expenses, they’ll have a better sense of what they can realistically pay each month. If the amount they can pay is less than what is owed each month, it’s important for them to be honest with the creditor. Honesty and transparency are key to determining a realistic solution that will work for both parties.
Initiate Early Communication
If someone anticipates financial difficulties and doesn’t think they’ll be able to make their full payments on time, they shouldn’t wait until the payment is missed to talk with their creditor. Creditors may be willing to work with individuals who are proactive about addressing financial issues. There may even be special programs, such as hardship plans, for qualifying individuals that will help keep their accounts in good standing. Waiting until they are behind on payments instead can lead to fees, increased interest rates, and damage to their credit score.
Choose the Appropriate Contact Method
Creditors will often have many communication channels, such as phone, email, social media, online portals, and more. It’s important for people to choose the appropriate channel when communicating to creditors. For example, if someone wants to discuss a billing error, calling the creditor or sending an email would probably be more effective than messaging them on social media. People should also document the date, time, and the name of the person they spoke to, as well as any notes about changes or new processes for payment. This will be helpful in the event of inaccuracies or if the changes aren’t implemented. Many calls to creditors are recorded, so having this information will help them locate the recording and review it for accuracy if solutions aren’t implemented as planned.
Propose Alternative Solutions
Instead of just stating their problems, people should present potential solutions. It could be a revised repayment plan, a temporary reduction in interest rates, an inquiry about hardship programs, or a suggested new payment due date. Creditors appreciate borrowers with a proactive approach to resolving their financial issues. They can discuss the proposed solutions and the creditor may have other suggestions, too.
Seek Professional Guidance
If someone finds it difficult to effectively communicate with creditors or if their financial situation is particularly difficult to navigate, they should consider seeking professional guidance. Many Maine credit unions have Certified Credit Union Financial Counselors available in-branch or over the phone to assist people in overcoming their financial issues. Alternatively, people can seek debt management agencies or even seek legal advice to help them through difficult situations.
The Bottom Line
At the end of the day, in today’s complex and fast-paced world, managing one’s finances can be challenging. Being able to effectively communicate with creditors can prevent a bad situation from becoming even worse, or even prevent financial struggles from happening at all.