Armed Polite Society
Main Forums => The Roundtable => Topic started by: geronimotwo on July 05, 2011, 11:05:14 AM
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i have a friend who needed a loan after his divorce 5 years ago. he obtained a personal line of credit from citi (who has since been bought by beneficial) for the 15k ( at over 20% interest, ouch!) that he needed to satisfy the terms of his divorce. he has made regular payments of around $300 per month for the past 5 years and still has a balance of nearly the original principal. at this time he has the ability to get a lower interest loan to pay it off, but he would like to negotiate the balance before doing so, if possible.
what is a proven negotiating tactic for helping them to accept a lower amount? i told him he would have little leverage if the bill were current, as they don't see him as a default risk. should he not pay for a couple of months, and then try to talk with them?
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Sounds to me like the first and most important thing to do is get rid of that 20+% interest rate. That is costing him money daily. What does he expect to gain from negotiating on the balance compared to that?
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Trying to play shenanigans with the bank over his debt will just end up hurting him. His best bet is just to get a lower interest loan.
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"should he not pay for a couple of months, and then try to talk with them?"
Only if he wants to hose his credit rating and make it hard to get a loan to replace the loan he's got...
I've heard of countproductive strategies, but that one is about as counterproductive as one can get.
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he can try calling AND writing and telling them that before he takes his note elsewhere do they want to negotiate to keep him. write after the call to someone higher in the food chain. and give em 10 days 2 weeks to get back to you . he can start looking for new loan while he waits. bigger companies are smart enough to keep you
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Another possiblity is a low intro rate on a credit card balance transfer. Some will offer rates as low as 0% for a year. It's pretty easy to knock down the balance when there's no interest attached. At the end of the intro period he can always get another personal loan for the balance, or transfer the remaining balance to another card.
Of course, all this is contingent on him being able to set the card aside and not use it AT ALL while paying on the principal.
Brad
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i would think telling them that he is thinking of fileing for bankruptcy would get them interested in negotiating? i feel bad for the guy, but at the same time i wonder why he didn't get a better rate. he wouldn't normally touch a credit card. likely he just had no credit from not using it.
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2 points I learned from watching my brother and SIL floundering through financial issues (don't ask):
1. Most lenders will only discuss reducing the amount in exchange for a complete payoff. In other words, the bank says "we'll drop the debt to $10,000, and you must pay that off within 30 days."
2. On credit reports, the account will not be listed as being paid in full or paid off. Instead, it will be listed as "account settled." This is a huge red flag on a financial history.
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Don't hate me for the suggestion...but why not get a second job? Even 20hrs a week at minimum wage plus his normal payment would kill that loan in two years, leaving his credit intact. When I was going through massive financial issues, that's what I did.
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Don't hate me for the suggestion...but why not get a second job? Even 20hrs a week at minimum wage plus his normal payment would kill that loan in two years, leaving his credit intact. When I was going through massive financial issues, that's what I did.
he spends much of his time tending his garden, and animals. if he could give up his beer he would accomplish the same.
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i have a friend who needed a loan after his divorce 5 years ago. he obtained a personal line of credit from citi (who has since been bought by beneficial) for the 15k ( at over 20% interest, ouch!) that he needed to satisfy the terms of his divorce. he has made regular payments of around $300 per month for the past 5 years and still has a balance of nearly the original principal. at this time he has the ability to get a lower interest loan to pay it off, but he would like to negotiate the balance before doing so, if possible.
This is why, if I come up owing money to a woman who hates me in a divorce I didn't cause, I will disappear from the Grid. Going in debt for a divorce settlement? Really?
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becoming one of the "unpeople" is getting harder and harder. and enforces limitations on your life you might not anticipate
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becoming one of the "unpeople" is getting harder and harder. and enforces limitations on your life you might not anticipate
I am certain it is easier said than done and I will be the first to admit that I have had very, very few grievous infringements on my personal liberty and finances. But at the same time, I do not offer the sentiment idly.
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"should he not pay for a couple of months, and then try to talk with them?"
Only if he wants to hose his credit rating and make it hard to get a loan to replace the loan he's got...
I've heard of countproductive strategies, but that one is about as counterproductive as one can get.
^^^This.
If he can scratch together 60% or more of the balance he can try to offer them that as a settlement in full. But his best bet, really, will be to re-fi to a non-extortionist rate and then work like a madman to pay it off.
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I am certain it is easier said than done and I will be the first to admit that I have had very, very few grievous infringements on my personal liberty and finances. But at the same time, I do not offer the sentiment idly.
oh i believe ya but as someone who did it i suggest you consider very carefully. you should see the looks you get when they pull a credit report and you just don't exist for a decade or more. i've been back on the radar for a decade and 1/2 and its not as big an issue but i made 50 k a year and couldn't get a 3 k car note. i hada use wifes credit to buy a house.
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Without a superior tradeline there really isn't much negotiating to be done...
Missing payments? DO NOT DO THIS. Gas on the fire, followed by napalm, followed by...
Cut (ruthlessly) expenses until it's paid off.
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superior tradeline?
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superior tradeline?
Sorry. Line of credit with favorable terms.
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He took the money, right? Agreed to the terms? Bank has fulfilled their obligation?
He has a moral obligation to pay it off, if he can. Obviously he can. So my advice would be to tell him to stop trying to weasel out of his obligations and screw over the people he made a contract with, and concentrate on getting better terms and paying what he owes.
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20% Ouch.
Get it rolled into something lower interest. If he's a homeowner, take out a line of credit against the house. If he has reasonably good credit, he should be able to get a 12-months 0% credit card that the balance could be transferred to. That alone with his current payment would get the balance down to $11,400 before he would need to search for another 0% card promotion.
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He took the money, right? Agreed to the terms? Bank has fulfilled their obligation?
He has a moral obligation to pay it off, if he can. Obviously he can. So my advice would be to tell him to stop trying to weasel out of his obligations and screw over the people he made a contract with, and concentrate on getting better terms and paying what he owes.
he has made every payment. you don't believe in renegotiating? how is that a problem with moral obligation? at the begining of your quote you state he has a moral obligation to pay it off, and at the end you are saying to concentrate on better terms???? exactly what he is trying to do.
anyway, he called and they dropped 3 grand just for asking. anything more than that, and they need "confirmation" of funds in an account before he can talk with their supervisor. lol. (phone rep) let's see, you have 9,500 in an account, i guess we'll drop it to 9,500. (phone rep) who knows, i'll keep you informed.
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Trying to play shenanigans with the bank over his debt will just end up hurting him. His best bet is just to get a lower interest loan.
^^^ This.
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he has made every payment. you don't believe in renegotiating? how is that a problem with moral obligation? at the begining of your quote you state he has a moral obligation to pay it off, and at the end you are saying to concentrate on better terms???? exactly what he is trying to do.
Negotiating better terms is fine, that's a legitimate attempt to find a mutually benefial solution to the problem while still living up to the obligation to repay the borrowed funds. Negotiating a reduction of principal is trying to stick someone else with your debt.
Brad
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Negotiating a reduction of principal is trying to stick someone else with your debt.
And will thrash your credit for a really long time....as I am finding out (I had "settled" a car loan and a credit card back in 2004). Now I wish I hadn't, (they offered, I didn't ask) as 7 years later it's still hurting my credit, and the difference was only a few thousand, which I would gladly pay now to erase the impact. Morality aside, (again, they offered), it is totally normal for a business to negotiate some principal reduction if it means they will be able to collect 100% of half instead of 0% of the whole thing...it comes down to net present value (money now is worth more than money later), and the ability to write off bad debt as lost revenue.
On the mechanics of this (to the OP), when a settlement is arranged, it is almost always based on a near-term (<30day) lump sum--if they are going to write off part of the debt, they are going to want to maximize both the chance they get the newly negotiated amount and maximize it's NPV. If they are willing to accept the credit rating hit (again, I DO NOT RECOMMEND IT), attempt to get some lower interest rate personal loan or some other method of getting cash BEFORE you offer a settlement, then offer as much as you possibly can as a fixed lump sum.
A better course of action (which won't kill your credit) is before you miss any payments, get a personal loan, balance transfer, sell stuff, whatever (as long as any new money borrowed is at a lower interest rate), then offer a huge payment in exchange for a lower rate on the remaining...this typically works (again, they are trying to maximize their return so big near term $ is worth lowering the rate on the rest, and it reduces their exposure/risk)
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You're dealing with an entity that only considers the bottom line, not whether or not living up to it's promises is moral. You should feel fine doing the same - crunch the numbers and proceed on that basis.
Negotiating debt, principle and all, is good business and banks do it all the time.
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Negotiating better terms is fine, that's a legitimate attempt to find a mutually benefial solution to the problem while still living up to the obligation to repay the borrowed funds. Negotiating a reduction of principal is trying to stick someone else with your debt.
Brad
i don't see the difference. whether negotiating terms, or principle the bottom line is how much money is paid to the bank. how is one a morality issue and not the other? regardless, renegotiating a contract by two willing partners has nothing to do with morality, it is simply a business deal. now if some of you take issue with my suggested negotiating strategies, i can accept that.
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i don't see the difference. whether negotiating terms, or principle the bottom line is how much money is paid to the bank. how is one a morality issue and not the other? regardless, renegotiating a contract by two willing partners has nothing to do with morality, it is simply a business deal. now if some of you take issue with my suggested negotiating strategies, i can accept that.
You don't see a difference between "You gave me $10k at %x interest, I'm going to get a new loan at %Y interest" and "You gave me $10k, but I don't feel like paying that all off so how about you just take $5k and call it good?" If you lent someone $500, and they came back and said they could pay it all back, but hey would you take $200 instead would you be ok with that?
You're dealing with an entity that only considers the bottom line, not whether or not living up to it's promises is moral. You should feel fine doing the same - crunch the numbers and proceed on that basis.
Negotiating debt, principle and all, is good business and banks do it all the time.
So your argument is: banks are immoral for doing X, therefor you can do it right back and it's ok? Two wrongs and all that...
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no, i don't see a difference. if the total balance due for x principle at x % at the end of x years is x amount, whether the savings comes from principle or interest is irrelevent. money saved is money saved. again, the bank is a willing partner in these negotiations!
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no, i don't see a difference. if the total balance due for x principle at x % at the end of x years is x amount, whether the savings comes from principle or interest is irrelevent. money saved is money saved. again, the bank is a willing partner in these negotiations!
Right, you stop making payments and threaten to declare bankruptcy and the bank is a willing partner.
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Right, you stop making payments and threaten to declare bankruptcy and the bank is a willing partner.
while i see your point and admire the morals and principles behind it my experience with dealing with banks and mortgage companies makes them the bottom of the moral food chain
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my friend just called me. he was able to secure a loan for 9k at 5%. after depositing these funds in his account, he called beneficial and spoke with a supervisor. after they confirmed the funds were available, he suggested they that he could pay 8k to pay off the 15k+change he owed. they accepted!!! as stated by others it will be counted on his credit report as "settled" which is not the best, but he is happy as the proverbial clam to be out from under that interest load.
Right, you stop making payments and threaten to declare bankruptcy and the bank is a willing partner.
those were suggestions questioning what might work as leverage, and as i already pointed out i have no problem with anyone criticising them (in fact that is why they are posted here!) none of those fulcrums were used to get the above settlement.
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my friend just called me. he was able to secure a loan for 9k at 5%. after depositing these funds in his account, he called beneficial and spoke with a supervisor. after they confirmed the funds were available, he suggested they that he could pay 8k to pay off the 15k+change he owed. they accepted!!! as stated by others it will be counted on his credit report as "settled" which is not the best, but he is happy as the proverbial clam to be out from under that interest load.
He's out from under THIS interest load. That settlement just guaranteed that any future interest load, at least for the next 5-7 years, will be just as heinous.
Brad
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my friend just called me. he was able to secure a loan for 9k at 5%. after depositing these funds in his account, he called beneficial and spoke with a supervisor. after they confirmed the funds were available, he suggested they that he could pay 8k to pay off the 15k+change he owed. they accepted!!! as stated by others it will be counted on his credit report as "settled" which is not the best, but he is happy as the proverbial clam to be out from under that interest load.
Wait until he needs another loan, then he will wish he had that interest rate back.
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you'd be surprised wait 2 years it gets better 5 lots better 7 meh
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2 yrs nose clean = FHA Insured mortgage, but most other creditors still leery. 5 Yrs = conventional mortgage and most creditors not so leery, but still somewhat cautious. 7 yrs = most creditors satisfied that you're not going to be a repeat offender.
Brad
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don't forget the ironic credit card approvals immediately after bankruptcy. from the same companies you just defaulted on. and the sly tactic of slipping a reaffirmation of the old debt into the agreement
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don't forget the ironic credit card approvals immediately after bankruptcy. from the same companies you just defaulted on. and the sly tactic of slipping a reaffirmation of the old debt into the agreement
likely on the 5th page of terms in the really small print section!
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yup
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So your argument is: banks are immoral for doing X, therefor you can do it right back and it's ok? Two wrongs and all that...
No - my argument is that in a contract, either party can only expect to be bound as far as he binds himself. Since banks absolutely do not consider contracts to be a moral issue, but rather a bottom line issue, it is only fair that people they deal with treat them the same way.
Contracts with any large business are about economic exchange, not morals. The people you will deal with personally, nice as they are, do not act for themselves.
Now, if he had borrowed from a friend or someone else who loaned the money in his own right, and they had both established a personal relationship, a moral obligation would clearly attach.
It's a mistake to equate borrowing from the bank to borrowing from someone you personally know.
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It's a mistake to equate borrowing from the bank to borrowing from someone you personally know.
No. And not only no, but a vehement NO!!
An obligation is an obligation. Conditionalizing the obligation to repay based on the lending party's identity is not only morally and ethically wrong, it's an inherent dishonesty with yourself about what an obligation really is. It doesn't matter what the other party thinks, or who that party might be. Huge multi-national corporation or the kid next door, if you agree to repay, you repay. Period. To justify not repaying because the other party "doesn't care and it's nothing to them anyway" is self-justification for stealing. If you're okay with that then maybe you need to have a long and very heart-felt talk with the person you stare at in the mirror every morning.
Brad
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It has nothing to do with identity - it has to do with business practice. A bank can and does refuse to honor its commitments on the basis of financial advantage. They make the choice on the basis of economic gain, and nothing else.
That is why it's fair to deal with them in the same way. Not "because they can afford it" or for any other reason.
Contracting parties get partners who will reflect their behavior, and thats proper. If banks want people to make decisions on a moral basis, they should institute rules that require them to do the same.
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It has nothing to do with identity - it has to do with business practice. A bank can and does refuse to honor its commitments on the basis of financial advantage.
At the risk of massive civil and criminal legal liability? I don't think so. Some banks may pull bonehead moves based on one division not knowing what the other is doing, or because one person got their panties in a wad or had some kind of personal power trip going. But no corporation or business, bank or otherwise, will knowingly impelement procedures or policies that puts them in position where the legal ramifications FAR outweigh any financial gain. Refusing to honor a commitment (i.e. Breach of Contract) does exactly that. They may use terms within the contract to mitigate their risk, but that's a far cry from "refusing to honor its commitments on the basis of financial advantage". Getting mad at them for using terms within the contract, the same terms EITHER party is open to use, is a sour-grapes sentiment at best. It's a "lets get mad at Big Bank so we don't mind screwing them for a couple grand" sentiment.
If banks want people to make decisions on a moral basis, they should institute rules that require them to do the same.
Banks don't loan morality. They loan money. And they do so by contract, with terms spelled out (and regulated heavily by the fed for consumer protection purposes, by the way). Those ARE the rules, and banks have to comply with them under a very real threat of stiff and severe criminal penalties and civil liabilities. It's unfortunate that so many people seem to forget they actually SIGNED A CONTRACT when they borrowed money. The bank is not "refusing to honor their commitment" when they expect people to pay, they are simply going by the letter of the contract signed BY THE BORROWER. If they borrower doesn't like it, they could always go to a loan shark. No contracts to bother with at all. You can even refuse to pay, getting all huffy and adopting the "I'm just not gonna pay because I don't think it's fair" attitude and not have to worry about a lien on your property or the police making an official visit. Of course, you may wake up some morning staring at the underside of the lake...
Brad
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No. And not only no, but a vehement NO!!
An obligation is an obligation. Conditionalizing the obligation to repay based on the lending party's identity is not only morally and ethically wrong, it's an inherent dishonesty with yourself about what an obligation really is. It doesn't matter what the other party thinks, or who that party might be. Huge multi-national corporation or the kid next door, if you agree to repay, you repay. Period. To justify not repaying because the other party "doesn't care and it's nothing to them anyway" is self-justification for stealing. If you're okay with that then maybe you need to have a long and very heart-felt talk with the person you stare at in the mirror every morning.
Brad
brad, i agree with your commitment to an obligation, but, i think if most of us were put in the position where we could only pay back the bank or the friends loan we would pay back the friend before the bank.
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If you're to a point where you're borrowing money from both, there's a much more fundamental issue of personal responsibility and fiscal restraint needs be addressed.
Brad
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^^^agreed