Personal loan debt: review the agreement and your options
Understand secured versus unsecured borrowing, hardship questions, refinancing costs and potential debt relief referrals for personal loans.
First establish whether the loan is unsecured or backed by property. Then review the rate, remaining term, fees and hardship options with the lender. An unsecured loan is not automatically eligible for settlement.
Check the loan agreement before comparing solutions
Record the outstanding balance, APR, required payment and remaining term. Identify any property pledged as collateral and any cosigner or joint borrower. Ask the lender to explain terms you do not understand.
A personal loan marketed for debt consolidation is still a loan. Calling it debt relief does not change the amount you have agreed to repay or the lender's rights under the agreement.
Sources: FTC: How to get out of debt · CFPB: Comparing debt relief approaches
Ask the lender what can change
If you expect difficulty paying, ask about available hardship arrangements. Explain what has changed and what you can realistically afford. Ask how a proposed extension, reduced payment or deferral affects interest, fees and the final payoff date.
Get the arrangement in writing. A temporary payment reduction may help cash flow while increasing the time or cost of repayment. The particular offer depends on the lender and your circumstances.
Sources: FTC: How to get out of debt
Compare refinancing using the total remaining cost
For the existing loan, list the payments and known fees still to come. For a proposed replacement, include origination charges, the new APR and all scheduled payments. Ask whether there is a prepayment charge on the current loan.
A lower monthly payment can come from stretching the term. Before turning unsecured debt into a loan secured by property, understand what assets could be at risk if payments stop.
Sources: FTC: How to get out of debt · CFPB: Comparing debt relief approaches
When a referral may be worth discussing
An independent provider may consider certain unsecured personal loans, depending on the lender, debt and state rules. Secured mortgages and vehicle loans are not the focus of the Done With Debt referral service.
No creditor is required to accept a settlement. Review potential credit harm, added interest or fees, collection activity and the consequences of noncompletion alongside counseling and other alternatives. We provide initial qualification and referrals, not direct negotiations. Residents of Arkansas, California, Hawaii, Louisiana, New Jersey, North Carolina, Oregon or Wyoming are not eligible for services through us.
Sources: FTC: How to get out of debt · Done With Debt: Our role and contact details
Bring questions for the lender or provider
Make the proposed change concrete before agreeing to it.
- What will I owe in total from today through the end of this arrangement?
- Does the proposal affect a cosigner, joint borrower or pledged property?
- Which charges apply if I pay early, cancel or miss a payment?
- Who remains responsible for debts that are outside the arrangement?
Sources: FTC: How to get out of debt · CFPB: Comparing debt relief approaches
Sources and further reading
- FTC: How to get out of debt
- CFPB: Comparing debt relief approaches
- Done With Debt: Our role and contact details
General educational information. This guide does not assess your circumstances or replace financial, legal or tax advice. Read our editorial policy.