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AUTO LOANS
Loans for automobiles are
considered a secured debt (see #7 in Loan Consolidation FAQ's for an
explanation of secured and unsecured debt) and as such are not
typically subject to lowering in a debt settlement or debt reduction
program. Other than declaring bankruptcy and totally eliminating
your car debt, or allowing your vehicle to be repossessed (either of
which will destroy your credit rating), there are two ways to help
alleviate the size of your auto loan without affecting your credit.
* Refinance at a lower
interest rate. This can be an iffy proposition because used car
rates are higher than new car rates. If you have good credit, make
sure you know your credit report scores when you shop for a better
interest rate. Having this knowledge in hand, you may be able to
negotiate for a lower interest rate than what is initially offered
to you.
* Pay down the existing
principal, thereby reducing the amount of interest on the loan.
Check your loan documents to determine if your loan carries any
prepayment penalties. If your loan does carry this clause, you may
be on the hook for all the interest due under the original contract,
even if you pay it off sooner. If your loan does not have a
prepayment clause, be sure to communicate to your lender that you
want the additional payment amount to be applied toward the
principal amount of the loan. This is best done by sending two
checks each month, one for the regular payment and the other one
clearly marked that it is to be applied toward the principal.
But what if you can't come up
with the extra money to pay down the loan? First, look closely at
your spending, and see if there are areas in which you can cut back
until you have the loan paid off. Second, use some money you don't
have yet. By this I mean the next time you get a raise or a windfall
(such as a tax refund) promise yourself you will apply half of the
amount to the car loan. Promising only half makes it more likely you
will keep your promise than promising all of it.
CONTACT US TODAY. WE CAN
HELP.
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