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You’re delinquent on your debt. What a bad thing to hear right? So, what’s next? You’ve got to deal with the debt collection agency as you seemingly have no option left. That’s the only way to pay back your debt.
You might have received letters and phone calls. Don’t cry. Don’t be intimidated. Just look beyond them. There’s always a way out, even in your present situation.
It’ll be stressful, but, you’re not alone. This article is helpful as it will ease the process. It covers how to pay off a debt in collections and will equip you with the tactics that can be used in order to successfully paying off your dues.
How do debts end up in collections?
Perhaps, you asked how? How do debts end up in collections? You might not even know it. The answer is that it results from a debt that was not repaid on time.
The debt may be a credit card or a payday loan that you didn’t pay off. Any of them could have been written off your debt as a loss which was sold to the debt collection agency that is disturbing you right now.
Keep in mind that most creditors and lenders send accounts to a debt collection agency after 90 to 180 days of nonpayment. All these might be reasons why you receive those phone calls and notification letters.
How do debts in collections affect your credit?
Understanding how debts in collections will affect your credit can prove to be beneficial. Your debt account is reported to the credit bureau. This is done either by your creditor or a debt collection agency. The report status can be identified as a “collection”. Any account marked with a collection is hurt because the credit score drops drastically. As a result, the same applies to yours.
The credit drop varies as it depends on the credit scoring model, but your payment history is important. It’s a significant credit factor throughout different scoring models. The higher the starting score, the greater the credit drops.
This collection cannot disappear overnight. It lasts long on the credit reports. It can mark your credit history for 7 years generally and it includes the earliest date the account pasts due. Although the long time, the negative effects on your credit scores will be reduced with time until your account drops off.
How to Find Out the Debt Collector You Owe?
If you don’t know the collector you owe, this section will be helpful. There are four different ways to locate your debt collector. Each is pointed in the bullets that follow.
Contact your original creditor
Call the company you owe a debt and ask for the debt collector in charge of the debt you owe or the agency they sold your debt to. After getting the right answer, call the debt collection agency and then, negotiate the payment.
Check Your Credit History
Here is another option. Get your credit reports. Check them. You should be able to locate the debt collector’s name on the reports because such things are reported into the credit bureaus. For the credit reports, contact Equifax, Experian or Transunion.
Review Your Voicemail and Caller ID
One thing is sure. You’ve received calls. Review your call history. Check the voicemail and obtain the name of the collection agency from the caller ID.
How to Pay Off a Debt?
There are many ways to pay off a debt in collections. Some are listed here and each is explained. By choosing one, you can pay collections.
Create a payment plan
Know what your budget requires and master your finances. Obtain what you can afford to pay weekly or monthly. Be specific. You can contact the debt collector after that via phone or email. A written document will be sent to you if they agree. The document outlines the deal for paying off the collection account. Ensure the agreement terms are correct before you make any payment.
Pay it off in one lump sum
Here is another option. You can pay it off with one lump sum. The money may come through a tax refund or from an inheritance. The latter can also come from you in case you doubled your hustle. It can be akin to pay off a debt with a low income. This is also a good way to pay off debt collectors.
But be careful. Ensure that your financial situation is good. Consider your things and ask yourself if clearing the debt with the money will leave you with almost nothing. List the pros and the cons. Consider them and then, make the best decision that suits your needs.
Make sure that you do not miss a payment. If you do, you’ll be sued by the debt collector and the agreement will be abandoned. This can be terrible as it leads to a wage garnishment.
An oral agreement is not a binding one
Get a written document. If for the sake of an example your payment is not recorded, a written document is your proof. It shows that you paid off your debt and even if the debt is sold to another debt collector, the latter is your proof.
Settle the debt for less than you owe
If you want to pay collections, make your debt payment easier. Be confident. It’s your money. It’s your debt. Persuade them. They will agree but remember you’ll have to pay them a fee for their service. You’re smart. Start the negotiation with a settlement lower than your target. Perhaps you want to pay a settlement, which 60% of your debt collections start at 40%.
Nobody wants to go delinquent on any debt. It’s bad. Having in mind what mentioned you can now pay off a collection and negotiate with a debt collector in order to get best deal that suits your needs. Hope you found it useful.