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How Can I Negotiate a Lower Loan Payoff on My Travel Trailer? – Mo

“Dear Steve,

I had a 2008 brand new Travel Trailer. It was just “Totaled” by a hail storm. I was insured by GMAC. They claimed ” FULL RV REPLACEMENT” without depreciation. When I checked that route it wasn’t what was promoted by them (long story), so I took the cash settlement instead. This went directly to the bank (Bank of the West) as they were the Lien holder.

Full original loan was $25,500, settlement was only $17,135. I was left with a $4,600 balance and nothing to show for it, even though I’ve already paid Bank of the West $10,300 in payments, along with their ridiculous interest rate of 7.7%. And…not to mention that this RV was used for my business and now I have nothing to show for all the money I paid into it over 3 1/2 years…just a wonderful remaining loan balance.

I already wrote a “Hardship” letter to the bank and they won’t work with me at all. I feel like I got screwed and I’d like to know if I have any recourse? Best scenerio, I feel I should not have to pay the balance. Worse scenerio, they lower my pay off amount significantly.


Dear Mo,

It sounds like you got hit with “the gap.” That’s the difference between the replacement value and the remaining amount due on a loan. Unfortunately if this had been another year or so down the road you’d probably have been a lot better off since the values would be closer together.

The values are the furthest apart at the start of the loan since most of the initial payments go towards interest instead of what you really owe on the note. It sounds like that’s what happened to you since even after the $10,300 in payments you still owed a significant amount on the balance.

In order to negotiate a lower loan payoff you and the lender need to come to a meeting of the minds. If they don’t want to accept less, they don’t have to and instead can decide to enforce the original terms of the loan agreement. Unfortunately the bank seemingly holds all the leverage now since the trailer was destroyed and not worth repossessing. All that remains from the storm is just the balance due minus the insurance payoff.

If you fail to pay the remaining balance then the bank will most likely start collection procedures and come after you for the balance, including possibly suing you.

What is far more likely to be negotiated at this point is how the remaining balance is repaid. Rather than demand a full lump sum payment, you might have some good success in working out a monthly payment plan for the balance.

If the bank is not willing to let you do that and cash is tight, you may want to consider as a source of the funds at lower than bank rates.

Please post your responses and follow-up messages to me on this in the comments section below.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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