Debt collectors are probably one of the most disliked people in the financial industry. It is quite sad to be in their position actually. They are only doing their job yet people seem to hate them. Although this negative reputation may not be unfounded because some of them do practice abusive behavior when collecting from consumers. But the bottom line is that they are just doing what they were hired to do. You should always remember that your debt is your responsibility. If they are collecting from you, they have every right to because you had been delinquent on your payments.
When collectors are brought into the picture, that means your original creditor had given up on your account. They have marked it as something that they will no longer profit from. It means that you had been late on your payments for a couple of months already. The chances of your credit score being in trouble is not unlikely to happen.
While the situation may seem ugly and stressful already, you need to keep your head together. There is a silver lining in this seemingly bleak scenario - as long as you know how to deal with your debt collectors.
You have to know that you have the option to stop collection agencies from communicating and harassing you for your debts. However, that usually implies that you have no plans of paying them off and they may be prompted to sue you for your debt. You don’t have to subject yourself to that risk. There are techniques to help you deal with these annoying collectors.
First of all, avoiding the calls of the collector will not do you any good. You should entertain them. You have to treat them as professionals. Be polite even when it is evident that they are being threatening. Sometimes keeping a cool head will get them to lower their tones and be more friendly. You want to show them your good side as it will help you during the negotiation process.
When you are negotiating with them, start with your payment term. As mentioned, at this point, you have been late on your payments - usually because you are in a serious financial crisis and you cannot afford your old terms. Keep in mind the amount that you know you can afford. Never agree if you know that your current finances cannot pay for it. Keep mentioning bankruptcy to get them to agree to the ideal amount that you can afford to pay.
Ask the collector about your credit score too. How will all of this be reflected on your score. Include that in the negotiation. If you can pay them a big amount, you can ask them to remove the record on your credit history. Or if they will not agree, you can ask them to mark your credit record as current or settled - whatever is applicable.
It will help your case if you read about the FDCPA or Fair Debt Collection Practices Act. This law is implemented by the FTC or Federal Trade Commission. It states the right practices of collectors so you know when they are overstepping already and abusing your rights.
Obviously, the only way to appease the collector is to give them the assurance that you want to pay them but you need to base it on the amount that you can afford. If you ever come into an agreement, make sure that it is in writing. Don’t send them any amount until you have a written agreement in your hands.
If you had been content on making the minimum payment on your credit cards, then this is a wake up call for you. Contrary to what you may believe, paying only the minimum amount stated on your credit card bill cost you more than what you believe. That amount is only 4% of the principle amount that you owe. That the the only percentage that you are paying for and the rest are finance charges and the high interest rate what cards are notoriously for.
This article will prove to you why paying more than the minimum can save you more in the long run. Financial experts will always tell consumers that sticking to the minimum payment is the most common pitfall that can trap you. It gives you a false sense of complacency - thinking that you are solving your debt problem when in truth, you are not. Most of us want to minimize our debt payments so we can allot more of our income for our daily expenses. That can be satisfied by the minimum payment and will keep your credit score from suffering. However, this method will maximize the extra payments that you will make outside of the actual debt that you owe.
It all makes more sense if we do a bit of number crunching. Let’s us assume that you have $5,000 worth of credit card debt with an APR (annual percentage rate) of 20%. Your minimum payment is $200. If you stick to this amount, it will take more than 11 years (11 years and 11 months to be exact) to finish paying your credit card balance. Not only that, you will be paying more than $3,400 worth of interest. That amount could have been spent on something more enjoyable right? And this is with the assumption that you will no longer use your credit card.
But if you add $50 to the minimum to make your monthly payment $250, you can pay off your debts in 25 months - that is 2 years and 1 month. That is a significant reduction on the 11 years that you need to spend finishing your debts if you have stuck with the minimum amount. Not only that, you will only end up paying for $1,133 worth of interest.
The more you increase the amount you pay every month, the less time you will spend paying for your credit card debts. If you make your monthly payments bigger, like $300, you only spend 20 months to completely pay off your debts. The interest amount also becomes a little over $900 only.
Imagine all the savings that you will get by skipping on your morning Starbucks latte or opting to take a brown bag for lunch everyday. It doesn’t have to take years to finish your debts. You can make the decision to finish your debts sooner by paying more than the credit card’s minimum payment requirement.
The decision is yours to make.
If you find it hard to meet the minimum payment, then opt for other debt relief options. Programs like debt negotiation may be a better alternative than sticking to the minimum.
If you have just finished your debt relief program and you think that you can take it easy from now on, that is where you are wrong. You know how you need to continue watching your diet even after achieving your ideal weight through a strict diet plan? The same is true for your debt and finances. Even if you have successfully paid off your debts, that does not mean you are allowed to spend till your heart’s content!
While it is not as difficult as before, it still takes additional work to keep yourself out of debt. One of the things that you need to monitor is your credit score, and in relation to that, your credit report. Let us discuss the reasons why.
First of all, your credit score is like a weighing scale. It tells you if your recent actions are causing your financial health to turn for the worse once more. More specifically, it allows you to see if you are gaining too much debt or falling behind on payments.
That is possible because your credit score provides insight about five areas in your finances: payment history, debt amount, credit account history, new accounts recently opened and the types of credit that you have. One of the benefits of knowing the details of these financial measurements is being able to identify if you became a victim of identity theft. By spotting this as it recently happened, you should be able to prove that you did not make the loan. If you never check your credit score or report, you may have been paying for something that you did not benefit from at all!
One more reason why you have to develop the habit of checking your credit score is to be able to repair it if needed. Sometimes, debt free people get carried away celebrating their new found financial success that they do not realize they are acquiring debt once more. Be very careful not to fall back into debt. If you are keeping tabs on your report, it should be easy to spot if your score is getting lower. you can rectify that immediately - at least before it’s too late.
That also helps if you have an upcoming purchase ahead, especially if it is as costly as a home or even a new car. You should be able to prepare your credit score so it is in good enough shape to make you a low risk borrower. Being such will allow the lender to give you a low interest on the loan that you have to take out.
Lastly, you want to check your credit score often because you need to check for errors. You have to send a letter to the credit bureau immediately if you spot any mistake on your report. It is your right to file a dispute for any incorrect records against you.
This monitoring is not costly at all because you have access to one free credit report from each of the major credit bureaus.
If you are still buried in debt, you still need to monitor your credit score. Learn more about your options by visiting National Debt Relief. The initial consultation is free.
Debt collectors are probably one of the most disliked people in the financial industry. It is quite sad to be in their position actually. They are only doing their job yet people seem to hate them. Although this negative reputation may not be unfounded because some of them do practice abusive behavior when collecting from consumers. But the bottom line is that they are just doing what they were hired to do. You should always remember that your debt is your responsibility. If they are collecting from you, they have every right to because you had been delinquent on your payments.
