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Repay defaulted loan in full or rehabilitate?

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    Posted: 19/May/2017 at 7:58am
Hello there,
I recently received an inheritance that will allow me to repay my national student loan debt in full. The loan is currently in default and collection with the CRA. 

I'm wondering if it will make any difference to my credit score if I repay the full amount directly to CRA immediately or if I rehabilitate the loan through monthly payments and then make the payment in full to NSLSC?

Any tips would be great. Thank you!
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Johnny View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Johnny Quote  Post ReplyReply Direct Link To This Post Posted: 20/May/2017 at 7:27am
 If you are benefiting from the education and can pay it - you should do so. Rehabilitate or pay out. Whichever. 

If you are not benefiting from the education then make a case for compromise. 



Solve Student Debt specializes in solutions for students and graduates in student loan default, and those at risk of defaulting.

solvestudentdebt.com
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Post Options Post Options   Thanks (1) Thanks(1)   Quote Royal-NCO Quote  Post ReplyReply Direct Link To This Post Posted: 20/May/2017 at 10:40am
I agree with you, Johnny, but you didn't really answer the question.

What is the status of your credit report?  You may have as many as two negative trades reporting, plus two collections.  

If there are active collections on your report:

1) Provincial loan collection:  settle immediately.  
2) Federal loan collection: check the date.  If you're close to the 6 year limit  when collections fall of your report, you may want to wait for it to fall off, and then settle your loan.

Basically, it really depends.  I need to see exactly what is on your credit report to advise you correctly. Repairing my credit over the last 5 years has become a daily hobby for me.  I know a lot, but I can't give you a good answer without a more detailed understanding of your status on both Equifax and Transunion.
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Post Options Post Options   Thanks (1) Thanks(1)   Quote Johnny Quote  Post ReplyReply Direct Link To This Post Posted: 22/May/2017 at 8:35am
I only answered the part about the student loan and repayment of it. I don't get involved with credit issues that much. You covered the rest and it is very good. 

Rehabilitating a loan will amend the credit report. Otherwise, it is not rehabilitated.  If the loan is reported to the bureau, then it is either "settlement made, zero balance" or paid in full. Or, the rehabilitation action will reset the report to current and in good standing conducive to an I1 grade.  

I don't get into credit discussions of the sort on a forum other than what I wrote up there above. I am not a credit counselor. Wink


The only thing I would add to what you wrote: 

"2) Federal loan collection: check the date.  If you're close to the 6 year limit  when collections fall of your report, you may want to wait for it to fall off, and then settle your loan." 

If the loan reaches the limitation threshold for reporting that is one thing. But - if the limitation issue applies to the debt and it being written off, then that is a surgical process to engage a compromise appeal, metaphorically speaking. 

My position is that anyone who is benefiting from the education they received, and can pay - should pay, without question. If anything less then the matter should be valuated and demonstrated based on valuation, achieved benefit, and-or lack there of, etc. The reason Canadians and Americans are so deep in debt is because the system does fail them. Universities and colleges in Canada especially are  not held accountable for their short-comings either. 

The fact is that the government is bound to also work with people - and not oppress them. 

The CFW Group's student debt crisis management services only works in three areas of mediation and intervention. 

1) Appeal for compromise (debt reduction and settlement - Canada and USA), 

2) Analysis and demonstration of hardship for the purpose of applying for removal (Federal, Provincial, and USA private and federal);and 

3) Mediation with justice Canada and provincial litigation issues involving student loans and other non-tax related issues. 

As for Equifax and Trans union, they have different policies. This is how they compete in their business class and be "different"  

Solve Student Debt specializes in solutions for students and graduates in student loan default, and those at risk of defaulting.

solvestudentdebt.com
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Post Options Post Options   Thanks (0) Thanks(0)   Quote raindrop Quote  Post ReplyReply Direct Link To This Post Posted: 22/May/2017 at 10:07am
Thank you for your responses Johnny and Royal-NCO. I am indeed intending to pay the loan back, but was wondering precisely about the credit impact of paying the loans back directly to collection (CRA) vs rehabilitating and paying in full to the lender (NSLSC).

I just spoke to someone at the NSLSC and they claim it will make no difference to my credit either way but they didn't really seem authoritative on the subject.

I requested my credit reports last week so will update with more info when I have those in front of me.

Thanks again!
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Johnny Quote  Post ReplyReply Direct Link To This Post Posted: 22/May/2017 at 12:05pm
That's a good move. That way you can state what is reported and then it is easier to answer questions. 

DH Ltd employees taking inbound calls are scripted. I am surprised you were told that. 
Solve Student Debt specializes in solutions for students and graduates in student loan default, and those at risk of defaulting.

solvestudentdebt.com
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Post Options Post Options   Thanks (1) Thanks(1)   Quote Royal-NCO Quote  Post ReplyReply Direct Link To This Post Posted: 22/May/2017 at 12:37pm
The reason I need to know what is on your credit report is because there can actually be a big impact on your credit depending on the status.  You don't really want to revive a trade if its months away from falling off your credit report (key issue with Equifax which ages off a trade 6 years after date of last activity - payment).  You can wait for it to age off, and then pay the balance in full.  Alternatively, you CAN rehabilitate, but its better to do that after the trade has aged off.  These issues only apply if your close to that 6 year limit.   If you're not close to that limit, it really doesn't matter.  In fact, in that case its best to pay it in full and be done with it, however make sure its accurately updated on your credit report.

Once you're rehabilitated, they initiate a new trade on your credit report which is an instalment loan. This is calculated into your affordability ratios for all future types of credit you may apply for.  You want to evaluate whether or not having that new trade is in your best interest.   Furthermore, during the period of time ( 6 months ) while you make rehabilitation payments, the collection is updated to reflect your current status.  Therefore, depending on your credit report, it may be much less damaging to simply pay it in full so that the collection reflects the full payment.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote raindrop Quote  Post ReplyReply Direct Link To This Post Posted: 30/May/2017 at 7:37pm
Hello again. I finally got my credit reports in the mail. From what I can tell neither Equifax or Transunion show records of the current debt in collection with CRA. Both show records of the original loan and any delinquent payments from the period but report it as 'transferred or sold' and 'fulfilled' or 'paid in full' as of 2013.

Considering this I assume I should just pay the lump sum off directly to the CRA and then wait for the past delinquencies to slowly drop off the record...

Thanks again for the input Johnny and Royal-NCO.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Johnny Quote  Post ReplyReply Direct Link To This Post Posted: 31/May/2017 at 10:48am
It's no trouble. Royal deserves a lot of the thanks. He is really good at pointing out opportunities from his own unique lens and experiences with student loan issues. He makes good sense! 
Solve Student Debt specializes in solutions for students and graduates in student loan default, and those at risk of defaulting.

solvestudentdebt.com
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Royal-NCO Quote  Post ReplyReply Direct Link To This Post Posted: 31/May/2017 at 10:50am
Yes, in that case, just pay it off in full, unless there are extenuating circumstances that lead you to believe that you've been wronged in some way or another.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Royal-NCO Quote  Post ReplyReply Direct Link To This Post Posted: 31/May/2017 at 10:55am
Forgot to mention that as a condition of repayment they must provide you with a written statement that indicates you have paid them in full.   Do not let them get away with this.  You must have something in writing so that they can't come after you later.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Royal-NCO Quote  Post ReplyReply Direct Link To This Post Posted: 31/May/2017 at 11:01am
Originally posted by Johnny Johnny wrote:

It's no trouble. Royal deserves a lot of the thanks. He is really good at pointing out opportunities from his own unique lens and experiences with student loan issues. He makes good sense! 

I am coming at it from the perspective of the guy who was in a mess and fixed it thanks to information I received from you on this forum.  Thank you very much for your help!

I have gone a long way towards fixing my credit since then.  This repair process has had an unbelievably positive impact on my life.  Who would have guessed that I could charge over 100K on my credit cards only 4 years after the last derogatory was deleted from my credit report.   4 years ago I had one maxed out credit card with a $750 limit.
 
You CAN fix your life, people.  It really IS possible!!!
 


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Post Options Post Options   Thanks (0) Thanks(0)   Quote Johnny Quote  Post ReplyReply Direct Link To This Post Posted: 31/May/2017 at 7:02pm
Knuckle bump. Handshake
Solve Student Debt specializes in solutions for students and graduates in student loan default, and those at risk of defaulting.

solvestudentdebt.com
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Royal-NCO Quote  Post ReplyReply Direct Link To This Post Posted: 01/June/2017 at 5:21am
Raindrop, rereading your post, I realize that you make no mention of any provincial debt, only the national debt.  Are you certain that you are aware and dealing with all parts of the debt that you have?   There is normally a provincial portion as well unless all of this has changed since I was dealing with it.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote raindrop Quote  Post ReplyReply Direct Link To This Post Posted: 01/June/2017 at 8:12am
Yes I did manage to pay of the provincial loan in full a couple years ago so this last federal part will be the final push.

Great to hear that you've turned your financial situation around. I'm currently looking into repairing credit as well and am already feeling the relief of not having that debt nagging at the back of my mind.

I'll try to contribute to the forum as well as I learn moreā€”it's very helpful to have this resource here.
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