Negotiation requires two sides with different goals to find the sweet spot where those contrary interests balance.
Your quest is to get out of debt. The debt collector wants the bill paid, now and in full, or else. You don’t have everything the debt collector demands. Even if you did, there are a slew of other creditors clamoring for payment.
So, can this conversation be saved, or rather, can it produce a deal? Here’s a universal formula for working it out:
Your number and my terms
or
My number and your terms
Negotiations about money are made up to two elements: how much money, and how soon is it paid. “How much money” is the number in our formula; “how soon” constitutes the terms.
So, how do you apply this formula when you get a collection call? Let’s suppose the debt collection wants you to pay 70% of a $2000 bill ($1400) now. You don’t have $1400. You’d like to settle for 25%; that’s $500, and you have that amount available now.
Applying our universal tool, and setting aside all the possible compromises on numbers between the two opening offers, this negotiation could settle in two ways.
One, you agree to pay the collector’s number ($1400) on your terms, which is over time, say, $200 a month for seven month. The collector got his number, you got your terms in the form of more time to come up with the money.
Alternatively, the collector agrees to your number ($500) payable immediately (his terms).
The offer of payment immediately of an agreed number has lots of appeal to the recipient of the money. Payment on the spot eliminates any further effort to account for payments; the collector can close his file and move to the next case. The additional virtue is that the risk of intervening events derailing the payment plan is eliminated.
When confronted with a collector’s demand for X dollars payable over time, consider offering some fraction of X immediately, in full and complete settlement of the debt. The deal is done upon receipt of the funds and everyone moves on.
Reread Jay’s fourteen steps for saving money when dealing with debt collectors, keep this universal tool for reaching a compromise in mind, and get yourself out of debt.
Image courtesy of Mykl Roventine.
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Thanks, I think, to Nelson Smith, for including this post in this week’s Carnival of Personal Financehttp://financialuproar.com/2011/08/15/carnival-of-personal-finance-322-diminished-expectations-edition/.
He misspelled my name and and claims to have missed the point of the post. Oh, well.
I got one company who calls me 3 times a day, I only answer about twice per year. They want 35 grand. Good luck with that. I owed a credit card company about $15,000 which this company bought and has added interest so it is up to 35 grand. I lost my job and then the house and this card is all that did not decide to leave me alone. I tell them to sue me but they haven’t yet. My only income is SS and that is not attachable. I have talked to them very friendly and told them I have nothing. I live in my daughter’s basement. So either drop it or sue me. Then the lady says could you mail us $500 per month??? I then ask if she is deaf and hang up.
That’s another approach. Good luck. Cathy
[...] effort to introduce the Universal Tool For Debt Negotiations was selected for the Carnival of Personal Finance : Diminished Expectations [...]
[...] Moran from Money Health Central knows the universal tool for debt negotiation. I read the post. Twice. And I can’t figure out what it is. Swing and a miss [...]