Auto Loans Gone Bad - What To Do?

What do you do when you get behind on your car payment and the auto finance company keeps calling you? First and foremost try to make payment arrangements, in todays economy finance company's want to keep your business despite your poor performance as long as you're willing to pay something towards loan.

However, in cases where you have no intentions of repaying the loan and you're willing to part with the car because the car salesman who sold it to you swindled you into a car loan that has you upside down (meaning the loan is more than what the car is worth). If this is the case than you need to call the auto finance company and tell them to come get the car. Once they have the car in there posession you must address the loan balance. Normally a portion of what the car sells for at auction will be applied toward the balance owing. Often this contribution still leaves a huge balance after the bank assesses late fees, penalties and wear and tear to the vehicle.

So what to do with the rest of the balance? Here is the answer straight and simple, word for word - settle the debt. Best case scenario they will allow you to settle for 25% to 30% of the balance and then the remaining balance they will write off and 1099 you at the end of the year as if though they gave you a credit on the loan. Talk to your representative at the bank and they will go more into detail regarding how this is done on their side. Keep in mind, this 65% to 75% discount will not come easy, there will be some posturing on both sides to negotiate this debt. But in the end you will come out ahead if you apply some of the basic negotiating theory we discussed in our second video and blog entitled, "negotiating theory". So I wish you well and we hope to see you back on the right track with your credit soon. If you have any questions or need any additional information please feel free to post your questions in the comment section and we will get you the answer you deserve.

Credit Mechanics Part 2 - Negotiating with the Creditor / Collection Agency

Negotiating Theory Part 2

It is important that we cover the theory behind what should inspire a sense of entitlement on your part to settle your debt for pennies on the dollar despite the discouragement you will receive from the creditor / collection agency. Keep in mind, when I say "pennies on the dollar" what I mean is a savings of 30% to 75% of what you originally owe in debt on any given collection. How is this possible?

Great question! Collection agencies want you to think that the debt they're trying to collect from you is the original debt that was borrowed along with all of the late fees and penalties. In reality the debt that they purchased was at a wholesale rate. In other words, when you opened up your Master Card and charged up $800 and never paid it back that debt was sold to a collection agency for around $300 or so and the original creditor wrote it off as a loss. Then the collection agency turns around and attempts to collect that debt from you for the full amount in addition to late fees and penalties that continue to accrue.

Knowing the truth about the amounts of money that could be involved with your debt and the strategy behind the collection agencies methods to collect is the intelligence you need to formulate your plan to counter this assault on your privacy and peace of mind. Here is what you need to know going into your phone call:

Step 1

Call the creditor / collection agency and tell them you want to settle the debt. Get the name and extension of the person you are talking to. Along with the date and time of the conversation. Make sure you log this in your file for the particular trade line you are calling in reference to.

(Please note: assume that the amount of the debt owed is $1,000.00)

Step 2

Listen to what they have to say and make a note of it. Often times they will tell you bluntly that you owe the full amount but that if you pay it today they will knock off some small amount, usually 10% which in this case is about $100.00

Step 3

At this point what you want to do is tell them, "listen, I don't have that much money but what I can pay is is $250 right now. Can you work with that?" In response the collection agency is going to tell you that they don't have the authority to take that and that they will have to call there client (the original creditor) and get back to you. The truth is, they're not going to call anyone. They might put you on hold and make you think that they calling someone, only to get back on the phone with you and tell you the answer to your request is "NO, their client would not accept that offer."

Step 4

Tell them you want to talk to a supervisor. Inform them that you're in the process of cleaning up your credit and trying to avoid filing bankruptcy. Tell them that you have a very limited budget and that if you can't settle for something that you can afford that you will take what very little money you have and file for bankruptcy. So what you're offering is what you can afford and they can take it or leave it.

Step 5

Shut you mouth, don't say a word. Let the silence sell them on your offer and watch what happens. you will most likely settle for something in the ball park of 50% or better. And if for any reason you are not happy with the offer that they make on behalf of your settlement be sure to leave your name and number and tell them that you're off to call your other creditors and pay them the money that they're going to miss out on and ultimately if they do not call you with a better offer than you will simply file bankruptcy and they will get nothing. Tell them your credit is already ruined and you have nothing to lose. I can assure you that within hours or days you will receive a call from the account manager with an update and a possible offer that makes better sense for your budget.

This technique really works, all you have to do is work it. Use your imagination and be confident. You deserve to settle your debt for as little as possible and get your credit back on the right track. Look around the website community or yellow pages and inquire with some credit counseling companies and or credit repair companies if you feel that you want to hire a professional to negotiate the settlement of your debt for you. It will cost you but it is an option nonetheless. I hope that this information will help you to do it yourself and save you money. Again if you have any questions please feel free to post your question in the comment section and I will be sure to get back to you with the answers you need.

First Step to Credit Repair: Get Organized

The first step in repairing your credit is to get organized. That means going through all of your mail and gathering all of your monthly bills statements and collection notices together in on big pile. Now you have the task of eliminating duplicates seeing as though there is the possibility that you have let these collection notices and bills pile up. Sort through the mess and once you've complete this task you're ready to take the following steps:

Step 1: Get a pen and paper, now write down all the names, address, phone numbers, outstanding balance and account numbers that are listed on each bill and or collection notice. Now go back through and alphabetize them from A - Z. This is the beginning of your master list of bad credit to be settled and erased from your credit report.

Please note: Often times collection agencies purchase your debt from the original creditor and in some cases on collection agency will sell it to another collection agency. Be sure to look for identifying information on the collection notice to see if you can figure out who the original creditor was. This is an important detail when following through to have your credit report "re scored". If there is not information regarding the original creditor, do not worry. I will tell you how to get it later in this article. Keep reading.

Step 2: Now that you have your master list you have to double check it to make sure that you're not missing something. The best way to do this is to run a credit report ton yourself, this will give you the creditor information you're looking for. Be sure to request a "TRI MERGE" report, that's Equifax, Transunion, and Experian. These are the three national credit bureaus that keep you credit information. I you're looking for a free credit report you can go to www.freecreditreport.com or if you have a friend or family member in the mortgage business they can get one for you as well.

Step 3: After you have acquired your credit report look through each line and compare it with your master list to make sure you're not missing any creditors and or have any duplicates. If you're missing some creditor info like a phone number or if your trying to figure out who the original creditor was look at each individual trade line and usually it is listed under the name of the creditor. If it is not listed here, look at the very last page of the credit report and there you should find at least the city and state of the creditors location. Then research it via www.yellowpages.com and usually you can figure it out by process of elimination.

Step 4: Take all of your information and create a file for each creditor / collection agency. The reason for doing this is because there will be a growing number of documentation for each account that you will be working to settle and repair along with several dates, times, peoples names and conversations that must be logged and tracked in order to accomplish your goal of repairing your credit on a budget.

Finally! You're organized and ready to start negotiating with your creditors and start tracking your progress. In the following blog we will cover what I call "NEGOTIATING THEORY" along with some scripts that work really well if you're trying to save as much money as possible and settle your debt for pennies on the dollar. So make sure you take notes because all of the information is relevant to your success.