What to Do About Default Loans
Defaulting on a loan has a negative impact on your credit rating. Whether the loan is for a mortgage, college tuition or a line of credit, once you have defaulted, it gets reported to the credit bureaus. At some point, you may want to purchase a home or buy a car and will need a decent credit rating to qualify. Taking care of defaulted loans is the first step to getting your credit back on track.
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Defaults
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A defaulted loan is a loan that has not been paid as agreed. Whether the loan structured required weekly, monthly, quarterly or annual payments, if the debtor does not meet the terms, the loan goes into default.
Identification
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Pulling your own credit report helps you identify all defaulted loans in your past. The lender will typically report defaulted loans to the three major credit bureaus, which in turn notifies future lenders that you failed to complete past lending agreements. Once you obtain a copy of your credit report, you can begin to contact lenders and work on getting the defaulted loans paid.
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Bargain
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When you contact the creditor that reported the defaulted loan, or the collection agency that now owns the debt, be prepared to take notes of whom you spoke with, what was said, the date and time of the call. In addition, don't hesitate to strike a deal with the collector. Ask if they will accept a partial payment as payment in full. If not, ask if they will accept full payment but erase the accumulated interest.
Follow Up
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They day after negotiating an agreement with the collection agency or creditor to take care of the defaulted loan, put it in writing and send it to the company in the form of an email. Also, send a certified registered letter that has to be signed for as proof it was received. The letter should state the date and time the agreement was reached as well as the name of the person you spoke with. Detail the new agreement terms including whether the collection agency agreed to note on your credit report that it has been paid. This will help solidify the agreement made with the collector.
Repeat Process
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Follow the same procedure with each defaulted loan on your credit report until everything has been paid as agreed.
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