Life is more of a crooked and rough terrain than a straight path. While one minute you might be making loan payments with consistency due to your stable job, the next minute you might be struggling with the same. In some cases, the cause of the struggle might not even arise from losing your job, but rather from bills piling up throughout the month.
As a simple example, two in every five student loan borrowers are likely to default on their loans, according to an article in CNBC.
When it comes to personal loans, debt restructuring can be a lifesaver for both your credit score and your credibility in the eyes of lenders. As long as you apply the right negotiation skills, you can work out a new contract with your lenders, which will result in a win-win situation for both parties.
Here are a few tips for approaching negotiations in the right way:
1. Always Keep the Lenders on the Loop
Since appearing as a credible borrower in the eyes of your lenders will have a pivotal role to play in steering your negotiations, building your credibility should start early. Just like in any other business, communication is key in the world of lending. According to cash1loans.com, lenders would rather anticipate late payments than getting surprised by them.
In case you foresee any hardships attaining the expected amount of payments for a certain installment, ensure that you inform your lenders up front. While you might still find a way to make payments later on, this will solidify your credibility.
2. Think from the Lender’s Perspective
Debt restructuring negotiations will not work in case you argue your case from your point of view. Try and look at the bigger picture by putting yourself in the shoes of the lenders. What exactly do they expect from you?
Most lenders will expect three things: to keep your loan going, to receive payments at the market rate interest and to have a realistic exit strategy for repaying your full liability. As a result, ensure that any deal that you put on the table considers these three expectations. The last thing on any lender’s list of desires is to find one of their loans in an irretrievable situation, which means they will be willing to listen to any reasonable deals you will have for them.
3. Take Responsibility
Sure, the economy might be the reason behind your financial troubles, but there are still people who afford their payments. Blaming the economy for any issue you have with your loan is only going to worsen your negotiations as you appear weak. Some lenders might consider that you will still find it tough to repay the loan even with the new terms.
Instead of blaming factors outside your scope of control, take responsibility for having trouble repaying your loan. Owning up will fortify your credibility as lenders will consider that you are ready to commit to paying the balance despite the financial challenges you might be facing.
4. Choose a Solution That Fits Your Situation
Different financial circumstances will call for different approaches. While lenders might not love some solutions, they may be the best options for severe cases. The most favorable option for debt restructuring is extending the maturity period of the loan as it keeps the loan alive while making the monthly payment amounts more affordable.
You can also negotiate to make interest-only payments for some time, especially if the loan has lived through most of its life. Although least preferred by lenders, you can try to reduce the interest payments.
Credibility means everything when negotiating for debt restructuring. As long as your lenders recognize you as a credible borrower, then agreeing to your proposal will be easier. Ensure that you closely consider your financial situation before proceeding to propose any deal.