Although the interest rate in the payments is very low, a lot of the original fees, charges from this creditor came from being late or over the limit.
Unfortunately the pay back amount is locked in and I've brought it down by $1k.
My school loans are going to be out of deferment soon and I will have no choice but to start paying them off. These 2 bills will conflict each other and I was wondering how I could get the counseling agency to work a deal in order to have it paid off in full by doing a lump sum.
I tried calling the creditor myself and talked about paying it off but never asked or tried to work a deal w/them (nor did they offer). I'd love to pay it off and bring my score back up since I have saved a little $ but if I pay it off in full I'll be left w/nothing in my savings. How can I get them to drop at least 30% off if not more if I'm willing to pay it off at once, instead of 3yrs? Do I stand a chance of getting them to at least drop 20%?
Answer: Your issue is a bit complicated because: (1) you have been dealing with credit counseling for quite some time and seems to have worked well for you and (2) original creditors are not as willing to take less than the amount owed on an account when you are not experiencing any financial difficulty such as loss of income or illness. The creditor has no reason to believe they will not be able to collect the full amount.
Even though you have perceived financial hardship once you begin paying off the student loan, it has not occurred yet. Normally original creditors have no incentive to settle debts for less while you are making timely payments.
Consumers who are 60 to 90 days in arrears have a much better chance at getting an original creditor to settle for less. It may not be worth the hit to your credit score if you stop making timely payments in order to be considered for a lump sum settlement.
I don’t think it is a good idea to wipe out your savings in order to pay a debt, especially since you said the interest rate is low on the debt. If you had $5,000 in savings earning 2% interest and $5,000 in credit card debt at a rate of 14% then the money would be better spent paying off the debt.
But in this uncertain economy it is wise to hold onto some emergency cash before eliminating debt. Having easily accessible cash to cover any unexpected expenses can go a long way if you are faced with an emergency.
Write your creditor, explain your situation and make an offer, you never know what they can do until you ask. In the meantime, consider extending your deferments, if possible or depending on your income perhaps your student loans qualify for Income-Based Repayment (IBR) where your loan payment can be less than 10% of the your income. Good luck to you.