If I ask my loan company that I have made all payments for four years on time, if I could negotiate settling for a lower amount than what is owed. Does it reflect negatively on my credit report?
An account marked as "Settled for less than full balance" will be a negative mark on your credit report, as explained below.
Many creditors will accept less than the full balance as payment-in-full. This is known as a settlement or resolution of the debt. However, you cannot simply ask the creditor to resolve or settle the debt for less than the full balance. To understand how to settle the debt for less than the full balance, we need to look an account from the creditor's perspective.
When a debtor stops paying on a debt, and the number of days since the most recent payment reaches 120 days, the account is no longer considered current, and the creditor is required to "write-off" the debt. Credit issuers are required to do this by the federal Office of the Comptroller of Currency, in an attempt to prevent banks from inflating future earnings statements with old and defaulted accounts. Writing-off a debt does not mean the debtor is no longer responsible for the debt, or that collection efforts cease, or that the debt is forgiven. The write-off date has no legal significance, and almost nothing to do with the statute of limitations for debts.
At the write-off point, the creditor discounts the value of the account and will transfer it to a late-accounts department. This is where the synonymous terms "write-off" and "charge-off" come from. It also has the option to either assign or sell the debt to a collection agent. It is after write-off when debtors can start negotiations to pay less than full balance. However, keep in mind the collection agent has the right to collect the entire balance due plus interest.
Debt negotiation, also called debt settlement or debt resolution, is the process of negotiating with the creditor to either establish a new payment schedule at a reduced interest rate, or a lump sum payment that is significantly lower than the total balance.
Keep the following five thoughts in mind should you choose to settle a debt for less than the full balance:
To learn more about debt resolution including bankruptcy, read What Are My Debt Resolution Options?
One final thought: Although it might seem odd to pay a fee to save money, experienced debt negotiators will save you far more than the cost of their fee. They know which creditors are willing to negotiate and how much of a settlement they will accept. Due to their network of relationships, they can settle debts you could not on your own. Visit the Bills.com debt relief saving center to get no-cost, no-obligation quotes from pre-screened debt settlement service providers.
I hope this information helps you Find. Learn & Save.