Do you want to get rid of an old loan but you are held back because it has grown tremendously? Credit card debt and other loans tend to grow if they remain unpaid because of the continuously rolling over of interest rates plus penalties and other charges. That is why your old loan may be more than the original amount you owed.
If this is the case, you may seek a possible debt settlement from your creditor. Debt settlement is a serious business transaction. It is an agreement wherein you and your loan provider would agree to trim down your loan amount so you could repay it sooner. It is typical for borrowers who have fallen into default or who have not been able to pay amortisations for quite some time.
It is understandable that lenders and loan providers are not openly discussing debt settlements. But you could seek and obtain to negotiate your debts with your creditors. Here are effective ways to get into such negotiations.
Know your statute of limitations
You should know that loan providers and their debt collection partners are given just a limited duration to collect your debt. If the time frame has lapsed, they could no longer be able to demand payments even through legal processes. By that time, you are no longer obliged to pay the loan. Before getting into any negotiation for a possible debt settlement, know your loan’s statute of limitation.
If that time frame has already passed, remind your creditor that the debt could now be considered as un-collectible. If the statute of limitation is nearing, tell your lender that it is in its best interest to get into any negotiation with you before the time frame is up. Do not let your creditor sense your desperation or urgency to clean up your debts. The ball should be in your hands.
Set an amount you are willing to pay
After that initial step, set an amount that you are most willing to pay. Begin by asking the creditor to eliminate all late fees, penalties, and other additional charges from your outstanding balance. You would be surprised that most loan providers would be instantly willing to do so as they may be desperate to at least collect the original debt amount
As the statute of limitations approaches, your creditor would be much more desperate to get into any debt settlement. If it shows much eagerness, strike again. Ask to reduce your original debt by up to 50%. Most loan providers would still agree because that is much better than not having to be paid at all.
Negotiate to counter negative credit report statements
Lastly, ask your creditor to take back or modify its negative remarks on your own credit report. It may change negative statements to ‘paid as agreed’ or simply ‘paid.’ This would bring about a big impact and improvement on your credit report.
To be sure, do not make any payment or debt settlement until you are sure every detail of the negotiation is put into writing. You may ask your creditor to send you a document or letter that would outline the agreed amount you would pay. Be sure the letter indicates that it would change its negative comments on your credit report. Remember, everything has to be in writing so you would not be fooled in the end.
Andrew Black specialises in financial solutions including personal loans and business loans.