auto

Will settling car loan kill credit score?

Tara Baukus MelloQuestionDear Driving for Dollars,
I've been having trouble making my payments on my car loan, and my bank has offered me a settlement plan. If I take that offer, will it damage my credit?
-- Cynthia

AnswerDear Cynthia,
Yes, settling car loan debt lowers your credit scores, though it will typically cause your score to drop fewer points than a car repossession would. Remember that your credit score already may have dropped due to late or missed payments, and it will continue to decline the longer you have financial trouble. So agreeing to the settlement and then taking measures to restore your credit may be your best choice.

One important thing to note is when all or part of a debt is forgiven, that amount is usually considered taxable income, so you may find that you'll pay higher taxes as a result.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

If you have a car question, email it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories. Follow her on Facebook here or on Twitter @SheDrives.
 

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

 

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
 

A little research could save you BIG on interest.

Don't have time? Our rate-tracker tool saves you time and money. Delivered Thursdays.
 
advertisement
Partner Center
advertisement

Blog

Tara Baukus Mello

Save money on gas over Labor Day

Everyone loves to save money and, with the cost of fuel, saving money on gas can have a sizable impact on your wallet. Now Walmart has jumped on the gas savings bandwagon with its Great Gas Rollback program offered at Walmart and Murphy USA gas stations across the country. Customers can save 15 cents per  ... Read more


Connect with us