Swapping Personal Loan Credit Life

[tombaker]

Hi guys,

Two years ago I took a R200 000 personal loan with African bank. I had bad credit and the interest rate I got was 24.5%. I could and still make the payment (R6000) but recently I calculated the interest I have been paying. It’s too much and it’s safe to say it has been my school fees. Basically, after 2 years the principal is at around R161 000 but I have paid R144 000 already.

I revisited the contract and saw the loan has a Guardrisk credit life policy charged at 5% (annually) of the principal debt. So on my payment, there is about R835 going to this policy.

I’m expecting a lump sum at the end of this month and can pay R100 000 towards this loan. I will then be able to clear the balance in 5/6 months.

When I took the loan, I didn’t have any Life cover but now I do. I have also added Retrenchment cover as well. So my life cover has all the things that the credit life policy has.

My question is:
Is it worth pursuing credit life policy replacement i.e. calling African bank and asking them to remove the Guardrisk policy and put my life cover instead? And has someone done a similar exercise?

 

[steamcoal]

@tombaker Lawyers specialising in Debt Collection, I deal with settlement offers regarding Personal Loans from 100k-300k on the daily.

You can always make a settlement offer to the credit provider, 9/10 times they will accept it if a sufficient offer is made.

It's worth a shot to offer and see what their response is.

 

[tombaker]

@steamcoal So you can make a settlement offer even if you are not behind on the loan? I am current on the loan and have not had any adverse financial situations recently.

 

[shelbycbaybee]

@steamcoal Could you define what a sufficient offer would be? 70% of the amount or 50% or?

 

[steamcoal]

@shelbycbaybee My client normally accepts offers ranging between 55-65% of the total outstanding balance, depending on the current financial circumstances and payment history of the client.

My advice; start low, and keep increasing the offer until they accept. I'm not sure what African Banks' criteria is for accepting or refusing settlement offers.

Good luck!

 

[beethoven89]

@tombaker I personally have gone through an exercise when I first got life cover to call all my loan/debt providers to get their insurance coverage removed to lower my amount eaten from my payments but noting that it doesn’t really remove the monthly payment just that your loan/debt will be furnished a lot quicker.

May I suggest doing it because at least when making the payment you’ll have the principal amount move down a lot quicker. The alternative would be to try and refinance but only if your credit score has been improved. Also take a lower duration, i.e. current 72 month loan now outstanding balance R100 000 after adding the lump sum payment, now you can just do a 36 or 24 month on a lower interest rate with the insurance removed.

Hope this helps.

 

[tombaker]

@beethoven89 Thanks. This does help and I will definitely do this.