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Debt settlement may seem like a solution to getting rid of your credit card, medical, or payday loan bills, but using this option for an auto title loan may make your circumstances worse. However, depending on your negotiating skills, bank balance, and willingness to pay, you may have a chance to settle with your auto title loan lender for as little as 25%-$75 of what you owe.
Debt settlement can work in two different ways: utilizing a debt settlement company or trying to settle the debt yourself. If you go through a debt settlement firm, you will give them all information regarding what you owe and to whom. You will make payment to the settlement company and in return they will put that money into a savings account. Once the balance in the account has reached a certain amount, the company will call your creditors to make an offer on settling your debt. It may be a flat fee or a percentage of what you owe. Once determined, the debt settlement company will pay your creditor.
If you choose to attempt debt settlement on your own, you can call your creditors and negotiate a settlement price. Keep in mind; you will have to be ready to give them a lump sum should they agree on a settlement amount. In most cases, the collector you are negotiating with is automatically given permission to reduce the amount you owe by as much as 75%.
Settling a debt with an auto title loan lender directly is going to be a bit different, though. First of all, the lender is not going to consider negotiating with you until you have defaulted on your loan. They will make every attempt to get you to pay before they are willing to take a lesser amount than what you owe. Loan amounts on auto title loans range from $1,000-$5,000 which means the lender is going to want to get their money back.
One of the biggest differences between settling on a credit card or medical bill versus a car title loan is that the lender holds the title to your vehicle and has the option to repossess the car, sell it at an auction, and recoup part or all of their money. This puts them in a good position to negotiate. They know you don’t want to give up your car and therefore will have more bargaining power. One benefit for you, the debtor, is that most title lenders don’t report to credit bureaus so in the case that you settle, it most likely won’t affect your credit score.
Whether or not your car has been repossessed and you want to attempt to negotiate a debt settlement with the auto title loan lender, start out by reviewing your loan documents to find out how much you owe. Next, find out how much your car is worth by looking it up online at Kelly Blue Book or another reputable automotive vehicle valuation company. If your car is worth less than you owe, the lender may be more open to negotiating a settlement since it is more profitable for them than trying to sell at an auction.
Decide on how much you can afford or are willing to pay should the lender accept your offer. Most lenders expect debtors to offer at least 20% at which time they can counter offer for more. Start low so you will have a better chance of settling for less. Once determined, send a letter to the lender with your account information, how much you owe, the current value of your vehicle and how much you are willing to pay. You will also want to explain why you can’t repay the full amount of the loan.
If at first the lender doesn’t accept your offer, be persistent. Keep negotiating until you and the lender reach an amount that you can afford. Get the settlement in writing and make sure you pay the negotiated amount! If you default on your settlement you most likely will not have another chance to make good on your loan!
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