Understanding how to settle a debt with a collection agency is very important. Understanding this process can save you a lot of money and help you to repair your credit to boot.
If you find yourself in an increasingly tough financial situation, it is best to contact the creditor. Attempt to arrange a payment plan with them before things proceed further.
If you are unable to work out a payment plan with the creditor, you account may end up being suspended or closed. In the event this happens, two things will most likely take place – 1) your credit score will be severely damaged and 2) your debt will be passed on to a collection agency. This is when an understanding of negotiation tactics will come in extremely handy.
To add insult to injury, collection agencies normally purchase debt for cents on the dollar. Very often, the cost to purchase debt is just 8 cents to 12 cents on the dollar. This means that your $1,000 debt could be bought for as little as $80 or your $8,500 debt might be purchased for $680.
This, however, does not mean that the collection agency will be amenable to settling for a trivial amount. Their business is to make money and they only do that by getting as much as they can from you. They may very well be nasty to you and possibly threaten a legal action against you.
However, legal action represents money, time, and effort on the part of the collection agency and, in light of this, it will normally not follow through with this threat. After purchasing your debt for cents on the dollar, your debt may, in fact, amount to very little to them. You should not, however, ignore any of the collection agency’s attempts to contact you. Your goal, as with the collection agency, is to settle this debt and get it behind you.
Lump sum payments are normally agreeable to collection agencies. This is because the collection agency knows you have some money on hand to pay what you are offering. You should make an iniitial offer to the collection agency of twenty-five percent (25%) of the original amount owed. The collection agency may then come back with a counteroffer. The process may go back and forth several times before an agreement is reached. Be sure that you do not offer what you do not have on hand to pay. Keep copies of all correspondence and documentation to and from the collection agency. Once an agreement is reached, be sure to obtain the agreement is writing.
Try to negotiate a payment plan with the collection agency if you don’t have a lump sum to pay. The matter will likely not go to court if the collection agency can see that you are making an attempt.
While you are negotiating a lump sum payment or a payment plan, you want to be sure that you obtain, in writing, the assurance that your debt will be “deleted in its entirety” from your credit history. A collection agency can retain this collection entry on your credit report for up to seven years so you want to make sure that it will be removed upon payment of the debt as agreed.
So, in summary, if you decide to settle a debt with a collection agency, go confidently to the collection agency and make an offer. Do not give in to bullying tactics, stay firm, but realize that this is a debt that you owe and the collection agency is in the business of collecting debts. Therefore, also attempt to be fair. Do not in any way ignore letters or phone calls which warn of possible recourse against you. Attempt to obtain the best rate possible. By following the advice in this article, you may be able to come to an agreement with the collection agency and clean up that old debt.
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Related posts:
- Collection Agency Basics Part Five: Getting Proof Of Payment And Avoiding Future Phone Calls
- Collection Agency Basics Part Four: Tactics A Debt Collector Uses And What To Do After You Have Paid
- How Will A Collection Agency Try To Collect My Debt?
- Negotiation Settlements With Credit Card Collection Agencies
- Can a Collection Agency Sue for a Debt?
