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 becoming late on payments, you should immediately contact the creditor and try to arrange a payment plan. This, hopefully, will contain the situation somewhat.
Failing to work with the creditor or being unable to arrange a payment plan, will result in your account being suspended or closed. If this is done, not only will your credit score plummet, but the debt will most likely be turned over to a collection agency. At this point, understanding the finer points of negotiation is necessary, not desired, NECESSARY.
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.
Collection agencies, however, are hesitant to actually launch a law suit for what amounts to a very small amount of money to them. A law suit represents energy, time, and money so a collection agency will normally stop short of this recourse. This does not mean that you should ignore any communication they attempt to have with you. It is best to attempt to settle the account.
Collection agencies like lump sum payments so, if you have the funds, make an offer. A good beginning offer to the negotiation would be to settle the debt in full for twenty-five percent (25%) of the original amount owed. Then, you should wait for a response from the collection agency. It may come back with a counteroffer. The process may continue this way until an agreement is reached. It is vitally important that you keep copies of all documentation to and from the collection agency. Be sure to obtain the final agreement in writing.
If you don't have the money to offer a lump sum payment, try to arrange a payment plan with the collection agency. If the collection agency can see that you are making an attempt to pay, it is likely that they will not take the matter to court.
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. - 29866
If you find yourself becoming late on payments, you should immediately contact the creditor and try to arrange a payment plan. This, hopefully, will contain the situation somewhat.
Failing to work with the creditor or being unable to arrange a payment plan, will result in your account being suspended or closed. If this is done, not only will your credit score plummet, but the debt will most likely be turned over to a collection agency. At this point, understanding the finer points of negotiation is necessary, not desired, NECESSARY.
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.
Collection agencies, however, are hesitant to actually launch a law suit for what amounts to a very small amount of money to them. A law suit represents energy, time, and money so a collection agency will normally stop short of this recourse. This does not mean that you should ignore any communication they attempt to have with you. It is best to attempt to settle the account.
Collection agencies like lump sum payments so, if you have the funds, make an offer. A good beginning offer to the negotiation would be to settle the debt in full for twenty-five percent (25%) of the original amount owed. Then, you should wait for a response from the collection agency. It may come back with a counteroffer. The process may continue this way until an agreement is reached. It is vitally important that you keep copies of all documentation to and from the collection agency. Be sure to obtain the final agreement in writing.
If you don't have the money to offer a lump sum payment, try to arrange a payment plan with the collection agency. If the collection agency can see that you are making an attempt to pay, it is likely that they will not take the matter to court.
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. - 29866
About the Author:
I Freed Myself from the NCO Collection Agency. See How I Did it at www.myncodebt.com
