• Fri. Sep 22nd, 2023

How to Negotiate a Lower Loan Payment

BySymbels Journal

Mar 2, 2023

Press Release


Mar 1, 2023 11:00 EST

iQuanti: The average repayment term for a personal loan can range from 12 to 60 months. A lot can happen in that time. Just look back on the past five years. If you sat down with a loan payment calendar to budget a loan in 2019, you would have had no idea there would be a global pandemic in 2020. That’s a reminder that anything can happen.  

Many lenders may be willing to negotiate new loan payment terms if you can prove you’re experiencing financial hardship. The global pandemic precipitated job losses and the death of family breadwinners and resulted in threats of eviction or foreclosure. Lender solutions to such catastrophic events affecting the general population or an individual can include lowering the interest rate, extending the loan term, granting a deferment, or even forgiving a loan under special circumstances. 

Asking for a lower interest rate on the loan 

A strong payment history builds trust with a lender. Borrowers making regular payments on established loans may be eligible to get an interest rate reduction. Regular on-time payments should increase the borrower’s credit score over time. Higher scores translate into lower interest rates. Consider asking about this if you’re several months into a loan agreement. 

Another reason a lender may agree to a lower interest rate is if the federal funds rate has gone down. Unfortunately, that’s not what’s happening right now. To contain rising inflation, the United States Federal Reserve has been raising interest rates steadily since early 2022. That makes it more difficult to negotiate a lower rate, but anything is possible. Call your lender for more clarity on this. 

Extending the term of the loan  

Borrowers who took out a loan in 2021 received better rates than those offered in 2022. That’s a good reason to extend the term of a loan now rather than trying to refinance it. Turning a three-year loan into a five-year loan will lower your monthly installment payments. You’ll pay more in total interest, but the interest rate won’t change.  

You can also extend the term by asking for a payment deferment. The lender could take this month’s payment request and add it to the end of the loan, extending the term by one month. This is a temporary relief strategy. While you may have a month off, your regular payments will resume the following month.    

Loan forbearance versus loan forgiveness 

There’s a difference between loan forbearance and loan forgiveness. With forbearance, one or more payment obligations can be frozen until the borrower gets through their period of financial difficulty. Forgiveness is a complete elimination of the loan, relieving the borrower of paying it. You won’t be completely off the hook, though. The Internal Revenue Service requires that taxes be paid on the amount forgiven.  

The Bottom Line  

You don’t have to be stuck with your loan payment. It’s not a pleasant feeling to be burdened with payment obligations you know you can’t meet. Negotiating your loan payment is one way to address that, or you could ask for a lower interest rate or extend the loan term. You may even find yourself in a position where it’s appropriate to ask for loan forbearance or forgiveness. Remember, given the state of the economy, you’re likely not the only borrower in this position, and the lender may be willing to work with borrowers like you.   

Source: iQuanti, Inc

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