repayment
Workout Agreement
A workout agreement is a negotiated modification to an existing loan's terms, reduced payments, extended timeline, or temporary forbearance, that a lender agrees to when a borrower is in financial distress.
Definition
What it means.
Lenders prefer workout agreements over default and litigation because recovery through negotiation is typically faster and less expensive than legal proceedings. Common workout structures include a temporary payment reduction (forbearance), a term extension that lowers monthly payments, or a lump-sum discounted payoff.
If you are struggling to meet your existing loan payment, contact your lender before missing a payment. Proactive borrowers almost always get better workout terms than borrowers who default silently. Most funders have hardship programs that are not advertised, they only surface when the borrower asks. Retaining an attorney for any workout negotiation above $50,000 is advisable.
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