Negotiating a lower payment, partial debt settlement, or the elimination of amounts owed requires due diligence. Lenders expect full payment when extending an auto loan. Nevertheless, changed circumstances often convince lenders to work cooperatively with borrowers who experience financial difficulty. Because auto loans are secured by collateral, the current condition of a vehicle and market value also play important roles. Success negotiating a debt settlement normally requires verifiable supporting documentation. In appropriate circumstances, options available to borrowers are almost unlimited.
Understanding an Auto Loan and a Secured Transaction
All auto loans are risky from a lender’s perspective. Owners may neglect maintenance. Insurance adjusters may deny coverage following an accident. Portable collateral may disappear. Because of these inherent risks, lenders tend to charge significantly higher interest rates on vehicle installment notes as compared to mortgages.
Before extending credit, lenders look closely at credit ratings, monthly cash flow, and the amount of discretionary income available to make monthly payments. After extending credit, lenders must accept the current financial condition of a borrower. At this point, lenders have placed a bet and look primarily to collateral value for security.
Changed circumstances are a fact of life. In the current economic climate throughout the U.S. today, job loss is common, lack of health insurance coverage causes medical bankruptcy, and divorce is on the rise. Anyone who experiences one of these unfortunate circumstances faces significant challenges making monthly payments to creditors. In these circumstances, repossession of collateral is a creditor’s last resort for payment.
Debt Settlement Techniques for Personal Automobiles
All lenders hope debtors pay on time. When payments are habitually a few days late, they become somewhat concerned yet enjoy collecting late fees. When payments slip more than 30 days past due, all lenders monitor status closely. The degree of concern directly correlates to the severity of lateness.
Few financial institutions consider altering payment terms when notes are current. In addition, few creditors give serious consideration to a naked request for payment reductions. Success negotiating better terms requires proof of financial hardship with documentation that is verifiable through independent sources.
Before requesting better terms, individuals or their representatives should consider the example provided by the credit card debt settlement services. These services frequently provide copies of letters terminating employment, bank statements, medical records, divorce petitions, and other evidence of hardship. The ideal time to provide documentation of hardship is before attempting to renegotiating terms. The best credit card debt settlement services do this automatically.
A simple cover letter is all that is necessary when mailing documents to a lender or collection agency. The letter should list all included items and state that the borrower will call regarding current payment status. In addition, a vehicle photograph may be helpful, especially when the appearance of a car is less than pristine.
The Best Result Depends on Unique Personal Circumstances
Borrowers who prove significant hardship have the best chance of lowering payments when collateral value drops below the total amount owed. If either condition is not present, the chance for success renegotiating terms drops dramatically. When both conditions are present, wise lenders tend to evaluate reasonable requests carefully. At this point, renegotiating terms and the settlement of auto loan debts becomes much easier.