How to Write a Letter Requesting a Car Loan Be Forgiven

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Writing a letter requesting that a lender forgive your car loan is easy to do, but there is little chance that the tactic will work. Banks feel an obligation to collect delinquent debt, including automobile loans. It's possible that lots of people would walk away from car loans if writing a letter could make the debt vanish. Despite that, there are some some possible benefits to writing a letter asking for forgiveness on an auto loan.

Get to the point in the first paragraph of the letter by stating that you cannot afford the car and wish to arrange for a voluntary repossession. A voluntary repossession allows you to schedule a time and place to turn the car over to the lender.

State in the second paragraph that you are aware that the lender will sell the car at a private sale or auction after the repossession. Tell the lender you cannot afford to pay the remaining balance on the auto loan after the sale. Lenders usually sell vehicles for the fair market value or below, with the former owner being responsible for payment if the sales price does not cover the balance left on the loan. If the former owner refuses to pay, the lender can file a lawsuit and obtain a so-called "deficiency judgment."

Explain why you are unable to continue making the car payments or pay the balance on the loan once the car is sold. List truthful problems such as illness or long-term unemployment. Also list the reasons you feel the bank should not file suit against you. For example, you might claim that you are "judgment proof" -- meaning you do not have any assets that the lender could levy in a lawsuit, such as money in bank accounts or regular paychecks from an employer.

Mail your letter to your lender and follow up by phone to discuss the voluntary repossession. Begin discussions for a settlement if the lender rejects your request to forgive any remaining balance on the loan. A settlement allows you to resolve the final balance on the account for less than the full amount. Also, the lender might allow you to pay in installments.

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