Speaking with creditors is not something most of us like to do, even when times are good. But in light of COVID-19, many creditors are much more inclined to listen to your situation and offer some form of debt relief during these difficult times. Here’s what you need to know before you pick up the phone.
Creditors Offering Debt Relief During COVID-19
Before we dive into tips for speaking with creditors, it’s important not to treat them like an enemy. In a joint press release, Canada’s six biggest banks announced plans to provide financial relief to those directly impacted by the coronavirus.
The release states the banks “have made a commitment to work with personal and small business banking customers on a case-by-case basis to provide flexible solutions to help them manage through challenges such as pay disruption due to COVID-19; childcare disruption due to school closures; or those facing illness from COVID-19.”
Support includes up to a six-month payment deferral for mortgages and the opportunity for relief on other credit products, including auto loans, personal loans, and even credit cards.
Of course, to take advantage of this, it’s imperative that you communicate with your creditors. Neil Parmenter, President of the Canadian Bankers Association, said so himself in a Tweet where he urged Canadians to “Talk to your bank.”
Each bank has set up a COVID-19 page where you can learn more:
8 Tips for Talking to Your Creditors During Coronavirus
Whether you plan to ask your creditor for reduced payments, deferment of payments and interest, or just looking for debt forgiveness, here are eight things you should do before you pick up the phone.
1. Prepare for the Call
Before making a call, preparation is key. This means understanding exactly what you’ll be able to afford; you don’t want to agree to a payment plan only to later realize that it’s out of your budget. Our Budget Planner + Expense Tracker can help give you an idea of what you may be able to put towards your debts once the necessities have been covered.
2. Know Your Story
Most creditors are getting more phone calls than ever before as people reach out to request debt relief. So, practice communicating your story in advance; try to keep the details of your financial situation brief and to the point. Your creditor just needs to know how COVID-19 has put you in a difficult situation and that you’re trying to be responsible, but that you need help.
For example, your explanation could simply be a couple of sentences, such as: “I worked as a server, and as a result of coronavirus, the restaurant was forced to close and we’ve all been laid off. Now, I’m unable to make my credit card payments. I’m hoping we can work out some sort of arrangement.” Keeping it short and simple helps prevent confusion and delay.
3. Keep Your Cool
Your creditor may not tell you what you want to hear – at least not right away. However, it’s important to remember that old idiom, “You’ll catch more bees with honey than with vinegar.” It’s going to be easier for you to persuade your creditor if you’re polite and respectful instead of confrontational.
During a crisis, it’s natural for people to want to help others, so appeal to their better nature. If you and your creditor can’t come to an agreement, rather than blow up (they’ll make a note on your account that you did, which won’t help your case in future negotiations), you should simply state that you’ll call back later when you’ve had some time to think about it (and not to mention, a cooler head).
4. Ask Questions
In times like these, remember, the only stupid questions are the ones you don’t ask. If you have a question, ask it. If you need clarification on something your creditor has told you, ask for it.
5. Keep a Record
You may be speaking with a number of creditors, and it’s important to remember what each one has said. So, keep a pen and piece of paper handy to write down what was discussed and any agreements that were made. If you’re using a smartphone, you might even consider recording the call so you can refer back to it.
6. Put it (or Get it) in Writing
In addition to making a phone call, it’s a good idea to write to your creditors, either through email or “snail mail.” This provides a paper trail so that in the future, if they ever question your failure to contact them, you can provide evidence that you did, in fact, reach out.
It’s also important that if you and your creditor are able to reach some sort of financial arrangement, that you ask them to send you the details in writing.
If you need help contacting your creditors in writing, check out our free downloadable COVID-19 Letter to Your Creditors you can customize and send to your creditors explaining your current financial situation due to COVID-19.
7. Speaker with Creditors, Not Collectors
If you were current on your debt payments prior to the coronavirus outbreak, but have since stopped making payments, chances are that your account hasn’t yet been sent to a collection agency.
This is a good thing! You have much more bargaining power before your account is sent to collections. So, pick up the phone and reach out to your creditor before you have no choice but to deal with the often less-forgiving collection agency.
8. Get Help Negotiating
While many creditors are more understanding these days than ever before, there will be times they aren’t willing to negotiate. If your credit situation is dire, you may want to consider a Debt Consolidation Program with Credit Canada.
In a Debt Consolidation Program, we’ll work with your creditors to lower your monthly payments, and/or reduce or stop the interest on your debts, so you only have one smaller monthly payment to contend with (and no more collection calls). You can read more about Debt Consolidation Programs here.
Credit Canada is Here For You
During these unusual times, Credit Canada is here for you. Hopefully, this has provided you with a plan on how to approach your creditors. However, if you would like to speak with someone about your current financial situation, our caring, certified Credit Counsellors are here for you at 1.800.267.2272. All of our counselling is completely free, confidential, and for the time being, over-the-phone. Not comfortable with a phone call just yet? Visit our COVID-19 Financial Resource Centre for more helpful content.