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.
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