Writing a Car Loan Settlement Letter [with Sample]

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In order to get out of paying an entire debt in full, several collection agencies will sometimes accept a certain percentage of the debt and settle, even in the case of a car loan. 

If the said account has been in collection for awhile or they believe the account is hard to collect, it’s quite possible they’d rather get something than nothing and settle. 

Collection Agency

A collection agency may send a client a letter that offers them a debt settlement on their car loan, or the client can initiate a diminished settlement offer. 

Any correspondence should always be done in writing as this is the ideal way to communicate with a collection agency or debt collector.

Writing a debt settlement offer letter can be somewhat intimidating. No one wants to share their sad circumstances with another party no matter who they are. 

The good news is that many times a well-written debt settlement offer letter can actually turn your dire financial circumstances around in your favor. Essentially, you have nothing to lose.

Do Not Call The Debt Collector

Why not just make a phone call rather than write a letter? While calling a debt collector on the phone can sometimes help, you may run the risk of getting a person on the phone who has no idea how to help you or handle your problem.

Many times, they will have to get their supervisor anyway. This is a waste of your time, energy, and effort. It’s better to just write a formal letter and document it in writing. 

This kind of letter should be formal in nature and should contain the key information the company needs to know. If this is a third-party collection agency, be prepared to submit the name of the original debtor along with the date and amount of when the original debt occurred. 

It’s hard to say exactly how a particular agency manages their accounts since they’re all different. However, by providing all the necessary information, they will likely find the account in question.

Block Letter Format

It’s best to stick with an official block letter format. Type your name and address in the top hand corner of your letter, then the date, followed by the recipient’s information. It’s always a good idea to incorporate a subject line or attention line as well. 

Because these kinds of companies have a number of representatives and departments, it’s best to address your letter to the attention of a particular person.

Ideally, the first paragraph will contain the bulk of the necessary information. Sometimes it’s easy for a reader to lose interest after reading the first couple of sentences, which is why the first paragraph needs to contain what’s most important overall.

Don’t Get Intimidated

Keep in mind as you write your letter that debt collectors read these kinds of letters every day, meaning they’re used to it. The goal of these companies is to collect money. 

However, do not let them intimidate, harass, or even threaten you in any way. Essentially, if they have your phone number they will call you both day and night trying to seek a solution.

Remember, they want to settle this delinquent account on your auto loan the same as you, which is why it’s better to keep the overall tone of your letter friendly but eager in order to reach a reasonable solution. Collection agencies typically move fast on these kinds of requests since most of their clients won’t have the extra money at a later date.

Sample Car Loan Settlement Letter

Chris Bond
7493 Fairfield Way
Burton, Ohio 43844


ABC Collections, Inc.
Henry James
443 Brighton Lane
Burton, Ohio 43844

RE: Account #2K8488R43L9

Dear Mr. James,

My account regarding Capitol One Auto Finance has unfortunately been placed with your organization for collection. 

Obviously, I’ve not been able to pay down this debt and have therefore avoided any contact with your organization. But, this year I did receive a substantial tax refund and am very eager to settle this debt once and for all.

The original Capital One account number associated with this loan was 585556587. The balance on my account when it originally went into collections was $2,895. 

But, with all the accrued interest and late fees, the balance on my last statement was nearly $5,500. At this time, I would like to offer a settlement proposal in order to clear my debt.

Because the original amount I owed was $2,895, I want to base my proposal off that specific figure. I want to offer a flat $1,500 on this account in order to settle it for good, which is about half of the amount I originally owed without calculating fees and interest.

If you accept my offer, I also want this reported to the credit bureaus that it’s paid in full. I can pay this amount today over the phone with my credit card. 

Please contact me at your earliest convenience at 555-845-2135. I look forward to speaking with you soon and resolving this matter quickly. 


(sign your name here)
Chris Bond