Settlement offer of car loan?

[Luby]

Just wondering can anyone offer me some advice please!

A family friend like many is in a very bad situation with money. Yesterday he made a settlement on a credit card of 1500 even though the balance was 5000.
Just wondering could you approach a bank with an offer to close off loan like this?? Has anyone done this if its allowed? would the bank be open to something like this?

Thanks!

 

[frostie]

Just wondering can anyone offer me some advice please!

A family friend like many is in a very bad situation with money. Yesterday he made a settlement on a credit card of 1500 even though the balance was 5000.
Just wondering could you approach a bank with an offer to close off loan like this?? Has anyone done this if its allowed? would the bank be open to something like this?

Thanks!

It's the same principle, but it also can depend on teh type of finance raised to pay for the car. Was it a personal loan or hire purchase? The bank will be reluctant to accept an offer of settlement if the loan has been maintained regularly, however if the finance was through hire purchase, under what is called the 'half rule' the car can be handed back. This is when repayments, including the initial deposit or trade in value, are equivalent to half the value of the finance provided.

This can be a useful bargaining tool, as the bank or finance company would have to accept the vehicle, and the loss on the balance. The vehicle now, due to depreciation, could be worth a lot less than the finance outstanding. So you are in a very strong position if you want to offer a settlement. If the car is handed back, the finance company would have to get the car collected at their own expense, and also dispose of the vehicle themselves. So you could offer even less than the current value of the vehicle.

The consequences of it would be that you would retain ownership of the vehicle, but it would be marked on credit file as a 'partial settlement'. Hope this helps!

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