How to Negotiate a Bank Payoff

A good step toward becoming debt-free is to reduce your interest payments by negotiating the payoff of your bank accounts. Perhaps you are trying to pay off your mortgage or car or other lines of credit. Maybe you are receiving a lump sum payment to satisfy this debt, losing a job or will be experiencing a reduction in income or facing a divorce and want to settle your bank account as a means of reducing your debt load. You can negotiate with your bank directly or seek the assistance of professional debt counselors to do this on your behalf.

Instructions

1




Compute the possible payoff figure.

Review your current balance. Use a finance calculator to compute payoff figures that you may be able to use as part of the negotiation process.

2

Contact your banker and ask for a reduced payoff figure for paying off an account in a lump sum. If the figure is higher than you calculated, discuss another amount and explain the circumstances surrounding the request, i.e., you are losing your job and want to reduce or payoff all current debts. Remember that a creditor does not have to negotiate a settlement or early payoff of a legitimate debt, but most are willing if they can receive a lump sum payment. Obtain the quote in writing and the due date.

3




When making lump sum payments on debt, make sure to pay the one with the highest interest rate first.

Complete the application, form or other paperwork the bank requires for paying off your reduced accounts. Have your funds available at the agreed-upon settlement or payoff date.

4




Credit counseling is available to help with debt reduction.

Contact a Credit Counseling Agency should you need assistance with this process. The nonprofit counseling agencies cost much less than for-profits.

According to Bank of America's website, there are differences between debt management and debt settlement companies:

Debt Management Agency characteristics generally include the following: nonprofit status, they provide professional credit counselors for financial education, many agencies are approved through HUD to offer mortgage counseling and can enable clients to pay off entire balances within five years and creditors are provided to work with accredited debt management agencies to negotiate payment arrangements.

Debt settlement company characteristics include: for-profit status, charge fees up to 15 percent of total balances, they offer little or no financial education and accounts are often allowed to fall further behind or be written off before a settlement is finally negotiated. It is possible that your credit may be negatively impacted for up to seven to 10 years and you may owe additional taxes if they do work out a settlement and, lastly, creditors often refer customers working with debt settlement agencies to their attorneys, who may initiate legal proceedings.