How will paying for a car loan on a repo car affect my credit score?

MissJessica: How will paying for a car loan on a repo car affect my credit score?
My husband and I signed a $ 20,000 loan on a truck. The payments were behind and the car was in a wreck. The truck was repossessed and the loan company says we still owe $ 8000. The loan company offered a settlement of $ 2800 if we pay by the end of the month. Does this sound right to anyone?
How would it really affect my credit if I pay off the loan now?

Answers and Views:

Answer by Digger
Sounds like a great deal, and is not that uncommon. Paying off the outstanding balance on a repo can only help your credit.

HOWEVER, GET IT IN WRITING! Before you send that $ 2,800 payment, make them put it in writing that $ 2,800 will settle the debt and they will report it as PAID IN FULL. If they don’t put it in writing for you, then after you pay $ 2,800 they’ll say your balance is $ 5,200! (5000-2800) Collection companies are snakes!

Good luck!

Answer by Mike
You will probably owe tax on the forgiven debt… So just as an FYI, plan on owing the IRS $ 1500 at the end of the year.

You are already behind on the payment, so paying in settlement probably will not hurt your credit anymore.

You have a repo… your credit will be bad for a few years.

If I were in your shoes, I would jump at the chance to pay the $ 2800.00 and put this behind me and move on with my life.

Make sure you get any agreement in writing.

Answer by Mildred S
tough question . it will look better to have a loan paid off than not paid off / still in collection. the issue is they could be fishing to see if you have access to that large of a sum so they know whether to pursue litigation and spend money on atty and filing fees/ process serving etc. Collectors are like detectives in figuring out what your assets are so they know how much they can get legally if it goes to court. I think that the rate they are offering sounds kind of low … which makes me suspicious.

I used to have a job years ago in a bank as a credit investigator but would have lunch with the coworkers that worked in collections / skip tracing. Was an interesting job / but it didn’t pay well . Banks are pretty cheap on the salary.

All things considered, I think that I would try it out and offer to pay the money by end of month on the chance that it will work out.
i would negotiate a release that the loan will be paid in full and reported that it was paid off in full on your credit report. they should sign something to remove any record of reposession from your credit report in exchange for the money. that would help your report greatly. the money should be delivered by someone other than you and your husband and they should understand that you expect a paid in full / satisfaction of debt release paper prepared. it would be great if they also include language / agree to remove any record of reposession. the reason you would not go in person is because you could be legally served there.

Good luck negotiating . If you can pursuede them to do this / you’ll save lots of money on future financing. A repo is a pretty big ding on your report and will cost you higher interest rates in the future.

Answer by Creatine Monohydrate 3-5gr daily
Greetings from an ex bill collector, The settlement offer, There is something the loan company isn’t telling you. If you settle the debt for $ 2,800.00 the remainder will be reported as INCOME to the IRS and you get to pay taxes on it as income! Having said that, even with having to pay taxes on the remainder and I have no idea what tax bracket you and your husband are in… it is still cheaper to accept the settlement than to pay off the entire debt. You only have to pay the tax next April 15th… Additionally, DO NOT rely on whatever you are told by the contact at the loan company. GET IT IN WRITING!!! get everything FROM them concerning the debt and the settlement in WRITING and IF there is any small print, READ IT!!! if you don’t understand any part of what they have WRITTEN, find someone who does understand it BEFORE you agree to or sign any document!!! It must CLEARLY state the ENTIRE agreement and leave no room for later additions. Basically you would be renegotiating the debt via a settlement contract and if it isn’t WRITTEN in the contract “no matter what anyone from the loan company tells you” it is BS. GET IT IN WRITING!!!