Reduced payoff for a debt. Getting offers in the mail.
My spouse and I are receiving Reduced Payoff letters from one particular loan company. We have been receiving these letters for the past few years and not taken the offer. As we look toward our financial future (within three years) there will be a drastic change in income where we may foresee a decrease in net income. We have not been delinquent in paying bills or credit cards, we have a good start on emergency savings (eight months of expenses), and money put away in retirement and investments.
Both of our credit reports are positive and we both have over 700+ credit scores. If we accept the reduced payoff we would be saving over $1500. If we continue with what we are currently paying this particular loan will be paid off within two and a half years. My questions are 1) Why would a loan company offer it's customers, that are not at risk of being delinquent, a reduced payoff for a debt? 2) With our current situation would it be wise to accept the offer?
Why and when to take advantage of reduced pay off offers?
That is a curious situation. Reduced payoff is synonymous with settling debt. Debt settlement does not typically happen unless an account is in a delinquent status. I have some questions about the situation.
Who is the creditor? Was the account ever considered delinquent in the past?
The only reason I can think of where a creditor is willing to offer a reduced payoff to account holders, and would proactively reach out to account holders making current payments, is if they lender is light on money and is attempting to boost liquidity in one form or another. Is this a furniture company, or a signature loan of some sort?
It may be a simple error in the account file that is generating these auto letters.
Have you called and spoke with anyone about the letters? There is likely a number for you to call on these letters that says “Call us in order to take advantage of this reduced payoff offer”. If this is a phishing type scam in order to get other financial information from you, you could just dial the creditor using other contact information not found on the letter you got in the mail. You should also be concerned about how the account would be reflected on your credit report (if this is a legitimate offer).
If you learn something odd about the payoff letter please come back to this page and post updates in the comment section below.
Congratulations with your household financial planning. The background information you gave is where every household should try to be. Especially in this economy.