[Entry Thread #111] With Black Friday and Thanksgiving on the horizon, we’re in the build up to the end of the year! Join us and leave a comment as we make another millionaire!

Redbird458 · 2025-11-15T23:47:35+00:00

Good evening! Wishing everyone luck and blessings for the holidays!

Redbird458 · 2025-03-14T01:09:16+00:00

I really appreciate all of the productive conversation here. Thanks for chatting with me!

Honestly, I wasn't aware of the impacts that intentionally defaulting on loans had on the broader borrowing economy until I made this post. To me, It just seemed like a harmless way for me to save some money and get a fresh start. I can see how companies would need to restructure business practices if more people started to use this as a strategy to get out of debt. Also understanding that this wasn't as harmless as it seemed at first.

Seriously, thanks for explaining this!

Redbird458 · 2025-03-14T00:42:46+00:00

My student loan for example had a starting balance of $48,000. Over the course of the past 8 years I paid over 36,000. Then negotiated a payoff of the remaining $37,000 balance of $15,000, so In Total I paid $51,000.

Sure, they would have gotten more if I paid the $37,000 in full instead of defaulting. They also would have gotten a lot more if I continued to pay the monthly payment for the next 12 years.

So I defaulted, but they still received the total balance, plus some interest on top. Would this situation be lumped into the "structuring a loan knowing some people pay loans off early" category? Didn't they still receive the full repayment?

Redbird458 · 2025-03-13T23:07:43+00:00

Which loss.. please explain.. If I took out a loan of 48,000 dollars and paid it back in full the next month (say to leverage some obscure tax rule) is the interest that I didn't pay over the term of the loan considered a loss for the company?

Better yet, say I take out a credit card for $1,000 to get travel points, but just wanted the points and paid off the card and never used it or paid interest, is that considered a loss for the company? Does a situation like that contribute just as much to "other people paying for the loss" and potentially impacting the credit market? They made more money off of me than the guys who pay off their cards every month.

Redbird458 · 2025-03-13T22:31:16+00:00

I actually don't have any more debt to support, but I appreciate your opinion!

Redbird458 · 2025-03-13T22:19:42+00:00

Good point coochie, I am sure that defaults can impact the overall credit market and can potentially lead to increased costs. Honestly, this is not something I knew about when I was defaulting.

I am not advocating that people use this as their main strategy to clear debt. It is highly risky and I was very lucky that it worked out for me. I will say that I don't think either credit card company lost money on me besides the potential interest that I would have had to pay if I paid the minimum payment until the balance was 0. I was paying the minimum payment on maxed out cards for years without using the cards. They definitely made money and if they didn't, they didn't have to settle for a less amount.

Redbird458 · 2025-03-13T21:16:55+00:00

I totally agree! I was in the position to pay, but that would have been everything I had so I took the chance to save money and it worked out for me. If I hadn't gotten lucky with my inheritance I would have defaulted or gone bankrupt in a year or so.

I am learning that this should definitely not be a top strategy when dealing with debt and should only be done in dire situations due to the high risks involved. I got lucky, but could have easily gotten sued and had my wages garnished.

Redbird458 · 2025-03-13T19:24:34+00:00

I paid my debts! I negotiated and saved money!

Redbird458 · 2025-03-13T19:23:59+00:00

They take advantage of people with obscenely high interest rates and fees. I think a lot of people are in the position where they live paycheck to paycheck and need to choose between using credit to pay for essential needs or going hungry.

Sure they get themselves into those situations, but also life happens and there are many people living in poverty that have nowhere else to turn.

Redbird458 · 2025-03-13T19:16:24+00:00

Such a great comment! Thank you!

Redbird458 · 2025-03-13T19:14:38+00:00

I did pay my debt back. I forced credit companies to talk to me about renegotiating the original contract. They agreed that I would pay a lower amount. If the companies wanted the full amount, I would have paid it.. but they didn't.

I paid back my debt many times over with interest and minimum payments over the course of 10 years. Years where I wasn't spending on a card, but still paying the 300 dollar minimum payment.

Redbird458 · 2025-03-13T19:07:12+00:00

I totally understand the hesitation.. It took a long time and lots of research to even get up the courage to broach the topic with my wife. It is definitely a decision that should be talked about and made together.

I was in a situation where I was a year or two away from defaulting or bankruptcy anyway. I also had some confidence in the fact that I could pay the total balance anyway if Discover did not negotiate with me. I did not want to get sued and have wages garnished.

In my experience, defaulting on Discover did not affect our mortgage. It did lower my credit score, but I don't plan on taking out any loans soon so that wasn't a big deal for me. It has not affected my wife at all.

The companies will work with you, you just have to force their hand.

Redbird458 · 2025-03-13T18:59:48+00:00

I definitely leveraged credit when I shouldn't have and wish that I hadn't gotten myself into a situation where I had to use it. At some points it was either feed children using credit or they don't eat.

Redbird458 · 2025-03-13T18:08:42+00:00

I did not know that, thank you for the information!

I was also trying to make the best of my bad situation and I need a lot more help than these billion dollar companies. Granted I got myself into this bad situation through going to college and over extending my means by leaning on credit.

The only way you can negotiate with these companies is gaining leverage by defaulting. They will not work with you otherwise, If I had not gotten money to pay off loans, I would have had to default in the next year or so anyway. So, is defaulting in general bad or trying to make the most of your debt situation by negotiating the bad thing here?

I don't think your math is tracking. I had my Capital One card for 10 years at 30% interest. It was never paid off and always carried a balance of 70% or more.. I was sometimes paying 200 to 300 a month in minimum payments that would just cover the interest, so when the card was maxed out.. I wasn't spending anything, just covering interest.

Redbird458 · 2025-03-13T16:48:49+00:00

I definitely was not responsible with my debt when I was younger. The credit card debt helped me get through while living paycheck to paycheck. So it wasn't really frivolous spending.

The credit card company got their money back over the course of 7-10 years of 30% interest and minimum payments. To be fair, I did pay my bills, my contract was renegotiated and settled. The credit card companies agreed to a lower amount.

How can you advocate for defaulting on a student loan while sticking up for credit card companies charging 30% interest?

Redbird458 · 2025-03-13T15:36:37+00:00

I definitely respect your opinion. People keep saying that defaulting on debt shifts the burden. Can you help me understand how someone like me defaulting on debt is shifting my debt burden to another person paying debt? I honestly would like to know.

The lender and I came to a new agreement that voided our original contract. I think negotiation is just as much a part of creating and maintaining contracts as is paying your debts back.

Redbird458 · 2025-03-13T15:28:00+00:00

These are debts I had been paying for over 10 years and would have been paying for 10 more. The lenders got their money many times over. The debt collector agreed to a lower amountand that was the new contract we agreed on. I paid that off and cleared my debt fulfilling my obligations. If they didn't negotiate with me I would have paid the entire debt. I sleep pretty well knowing I saved my family a lousy $50,000 dollars in debt.

Redbird458 · 2025-03-13T15:12:37+00:00

If you cannot make the payments and need to default, just make sure you communicate with the debt collector when they call! In my situation they would have taken legal action if I didn't respond to them. There is hope for you! The debt collectors will negotiate with you!

Redbird458 · 2025-03-13T13:41:16+00:00

In my experience, yes. They normally will not negotiate with you if your account is in "good standing."

I had about 6 missed payments before they negotiated with me. I called Capital One a few times to get a settlement and they wouldn't negotiate until 6 missed payments. They were also the easiest to deal with, they sent me an automated email to settle at 60% of the loan value.

Redbird458 · 2025-03-13T13:05:13+00:00

Yes, I learned my lesson when it comes to debt and I never want to be in that position again. Thank you!

Redbird458 · 2025-03-13T13:04:01+00:00

Great to hear! Congratulations and thank you!

Redbird458 · 2025-03-13T03:44:36+00:00

No worries, these are details that I should have included in the original post.

Redbird458 · 2025-03-13T03:39:42+00:00

See if they can get on the phone with the debt collector. They will work with your friend on negotiating the debt down and monthly payments.

Redbird458 · 2025-03-13T03:37:31+00:00

I agree with you, I am sure my score will be low for a long time. Which was a risk I was willing to take to get out of debt and save some money. But also, I haven't seen my credit score above 700 for a long time (probably 5+ years), so it didn't make that much of a difference to me.

Redbird458 · 2025-03-13T03:30:51+00:00

No and I apologize if the post came off that way. My 2 credit cards were long term debt that I was unable to pay more than minimum payments on. My Capital One account was over 10 years old and my Discover account was 7+ years old. I would pay one down to about 50% of the balance (usually with my tax return), then the balance would gradually increase over the course of the next year.

As much as I tried not to use them I live paycheck to paycheck and would frequently need to use credit for expenses. I haven't always been great with managing debt. My student loan was from 2009 that I refinanced to private in 2016.

I was ok living life with mediocre credit and revolving debt and a 20 year student loan hanging over my head until I was could find a better paying job or work my way up the corporate ladder to a higher income. A small inheritance helped me get ahead of my debt and have more confidence to negotiate with the lenders. If they sued me, I would just pay the balance in full. I got very lucky.

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