7 Tips to Working With Your Bank When You’re Broke

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As much as we hate to admit it, and even though thousands of people are diligently working to eliminate debt from their lives, debt and credit are constant realities in many of our lives. I know it is in mine. When times are good and the income is flowing in, it’s easy to work with a bank. They love you. But if you find yourself strapped for cash or even flat broke, there are some definitive steps that could help tilt the bank in your favor and get them to work with you and just maybe even improving your credit score.

1. Take the proactive step and make the first move. Bankers and lenders loathe collections, they would much rather be the guys lending the money rather than collecting it. Use that attitude to your advantage and make the first move when you sense that you’re going to have some financial problems. The sooner you initiate contact about potential problems, the more options that may be available to you. Waiting until the last minute has a nasty habit of limiting your repayment alternatives. Besides, it’s a good indicator of your financial maturity when you take the first step.

2. Formulate your own repayment plan. Lenders presented with a solution are much more amicable, so long as the plan makes sense. Remember that you’re repaying debt and that you DO owe the money, so this plan must be acceptable to the lender. Plans that don’t consider the cash flow needs of the lender won’t be accepted, but you would have a point to negotiate from.

3. Know your rights as well as your obligations. Reread your loan documents and consider having an attorney review them for clauses or phrases that could reveal a potential negotiating position for you. Your biggest leverage may be the amount of time it would take to foreclose, get a judgment, or file for (and eventually collect) a garnishment. Use the time value of money in your favor when negotiating.

4. Contact and only deal with decision makers. Time is your eventual enemy and you want to present your repayment plan to those who can make a decision, not with someone who will forward your file to some nebulous committee in another state.

5. Say goodbye to your emotions. Business is business and don’t get stubborn about cutting your lifestyle or selling some assets. You must demonstrate to your lender that you are serious about your debt repayment. Don’t get emotional and let go of your emotional attachment to the collateral that you may have to liquidate.

Always remember that “Cash is King.”

6. Provide consistent information and updates. It wouldn’t be out of the question to contact your lender daily to keep him or her informed of your financial progress. Communication with your lender will insure that he or she is on your side and will keep the ulcers down in their stomach. A banker with an ulcer caused by your lack of communication will not help your situation. Establish the habit of always answering the dang phone. Return the emails and voice mails. Do not hide.

7. Always be on the lookout for alternative financing. If your current lender balks at renegotiating your loan, or if your current financing options dry up, consider other lenders and even private lenders. Ask your banker for leads if his or her hands are tied. If they cannot help you, just remember that they want the loan paid off. If that means they have to give you some sources of alternative financing, they will be more than willing to do it. Private lenders in particular can be a lot more flexible and creative in structuring a financing deal.

The key is to be willing to WORK with your bank. Their goal is for you to pay off the loan. They want you to succeed, but they can’t help you if you don’t let them know what’s going on or if you run and hide. So, make a wise decision and take the first step. Make the call.

Do YOU have any tips for working with lenders?

photo credit: gigijin

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