Dec 11
7
How to Find the Right Company to Help With Your Defaulted Student Loan
If you’ve defaulted on your student loans and are struggling with Federal wage garnishments or collection agencies, you need help. Fortunately, there are a lot of non-government organizations that specialize in providing the help you need. Unfortunately, not all of them are reputable, and some can do you even greater harm than you already suffer.
How do you find the right company to help you with your defaulted student loan, and avoid the rest? Perform your due diligence—research and ask questions—before you sign any contract or agreement.
First, you want a company that can guarantee—in writing—a fixed lower monthly payment. Be careful here. Some organizations apply variable interest rates to their agreements, which means your monthly payment can change from month to month, and you can bet that change will probably mean a higher payment. Get the interest rate in writing, and make sure that it’s a fixed interest rate.
Next, study your different payment options. A higher monthly payment might be more attractive if it comes with a shorter repayment term. If you need a lower payment, you’ll probably be paying it for a longer period of time. Be clear about how long your payments will run.
Have the company show you where exactly in the contract it lays out their pay-off terms. There may come a day when you’re able to payoff the loan in full in one lump payment. Some companies will penalize you with additional charges for that payoff. Why? If you have signed a 25 year refinancing agreement, your loan servicing company expects to collect a certain amount of interest from you. That’s how it makes its money. If you payoff the loan early, it makes less money.
So, choose a company that does not penalize you for paying the loan off early. In addition, make sure the company allows you to make higher and/or additional payments on the loan whenever you’re able without penalties.
Only agree to a monthly payment that you know you can meet in good times and bad. Base your payment on those months when money has been tight, not on your big income months and not on the hope or anticipation of greater income in the future, like a planned raise or a new job. Plans fall through, hopes often aren’t realized. Your monthly payment must be based on cold hard reality.
Look for a company that helps you through the hard times. If you’re sick or hurt and can’t work, or if your employer lays you off, you may not be able to make your monthly payment. So, make sure the company has programs in place, like a month or two of forbearance, that you can use as needed. (Be clear about the interest rate the company charges for that forbearance.)
Find out what penalties will be assessed if you miss a payment, or only make a partial payment. They could be much worse than those assessed by the Federal loan program.
Make sure you know the worst case scenario. Some companies have contracts that grant them the right to repossess your belongings, from furniture to your car, if you default on their loan.
Finally, remember the Boy Scouts and Be Prepared. Read everything, including all the boring small print. In fact, it’s probably best to hire a lawyer for an hour just to make sure that your contract actually states the terms to which you’ve agreed, no more, and no less.
Many private loan serving/debt consolidation companies that specialize in student loans are reputable, honorable, and safe. By doing a bit of research and asking the right questions, you’ll get the help and guidance you need when you need it most.
