Difficult Times Lead to Stronger Borrower Leverage

According to the The New York Times recently, lenders are "rushing to round up what money they can (from delinquent borrowers) before things get worse, even if that means forgiving part of some borrowers' debts." This is due to an expected large increase in credit card defaults.

What does this mean for you? If you're experiencing really tough times financially and have credit card or other debt, you've now got stronger leverage in negotiating with your credit card companies or lenders.

For instance, Bank of America reportedly reduced loan balances for more than 700,000 credit card holders in 2008 and waived late fees and lowered interest charges. And all the major lenders have reportedly given their collection agents more authority to make concessions, including giving payment extensions and forgiving up to 70 percent of the debt at issue. Of course, delinquent borrowers will still get potential sharp drops in their credit scores.

Bottom line - if you are suffering financially due to the economic downturn or for other reasons and are having trouble making your credit card payments, now may be a good time to contact your credit card company to explore your options.

Because leverage is fluid and changes over time, my advice - strike while your leverage is hot and use the aforementioned article as an independent, fair standard to help justify your request.