About the Author:
Eric Reyes is a passionate thought leader having been featured in 50 distinguished online and offline platforms. His passion and knowledge in Finance and Business made him a sought after contributor providing valuable insights to his readers. You can find him reading a book and discussing current events in his spare time.
Debt collection is a reality that every business and individual should learn to live with. In a world where borrowing is the norm of the day, there is no doubt that there will come a time when debtors and creditors will be at crossroads, and collection will be inevitable. Because of that, there are several ways through which debt collection specialists can recover the owed amount. However, they have to be legal to ensure justice for all parties. The following are seven legal practices and methods for debt collection agencies.
1. Sending Friendly Payment Reminders
When the due date is approaching, and there is no intention of payment from the debtors, you should send them a friendly letter letting them know that the deadline is approaching. This letter aims to establish communication and get their communication about the situation. Be sure to be kind in this letter because you are persuading them to pay.
2. Sending Overdue Payment Reminders
If the friendly letter did not yield any results and the date has passed without payment, you have to make another move by sending them an overdue payment reminder. Let them know that they have taken more than the agreed time, and they should make plans to pay. At this stage, make sure that you let them know about the penalties that they are likely to face if they do not pay on time.
3. Giving a Final Notice
A final notice serves as a reminder that everything has been made to get the debt from the client, but nothing has been forthcoming. You have to let them know that your company will take action based on the terms of the debt. You may want to let them know about the waivers and other leniencies that are likely to be awarded to them if they pay at this point. Be sure to clearly state the position of your company and how they should handle everything.
4. Contacting the Debtors Directly
At this point, you have been quite patient with the debtor, but they seem not to respond to your communications. Even if they did, they probably did not pay the amount they owe, and therefore, you have to contact them directly. A phone call will be the best option in this case as you will get first-hand information from the company. In addition to that, you will get a personal response meaning that it will be easy to plan for the way forward.
5. Writing a Formal Demand Letter
Remember that contacting the debtors does not count as a legal process because there is nothing written about it. Because of that, you have to write a formal letter indicating your intentions to recollect the debt. Let them know that you have a process through which you do such things, and ask them to comply. You may want to extend a favor to them by asking them to pay subject to certain conditions. Always be professional when writing these letters.
6. Hiring Debt Collection Professionals
Once the deadline given in the formal letter expires, it is time to get into touch with a debt collection agency. This is when you engage professionals who know all the right things that are related to collecting such debts. They will analyze the situation and take over the process. They will also determine the best way to repossess the debt, including auctions.
7. Dealing With Excuses and Other Eventualities
You have to know that during the debt collection process, you will meet too many excuses as the debtor tries to evade an auction. They will also try to fight back through the courts and other arbitrary bodies. You should be prepared to handle such challenges because the most important thing is to ensure that the money you loaned to them does not go down the drain.
In a nutshell, debt collection agencies are justified in their effort to recover money that debtors are unable to pay. However, they have to do it properly and professionally so that everybody gets justice. In addition to that, they have to explore all options before they finally resort to drastic actions such as auctions. It is always good to follow a transparent process. When you do it right, there will be no complaints at the end of the process.
A collection account can drop your FICO® score by 60-110 points the very month it’s reported, and it stays on your file for up to seven years even after the balance hits $0. Before that happens, pull a free credit report at
Debt-settlement companies often charge 15-25% of the amount enrolled, and results are never guaranteed. A cheaper path can be a single installment loan that rolls multiple overdue accounts into one payment at a fixed rate. If your score is already below 580, look for loans for bad credit online guaranteed approval from direct lenders that report on-time payments to the bureaus. Paying one new account on schedule is far easier than juggling several collectors, and you avoid the “settled for less” notation that can scare future creditors.
Even a three-day delay can trigger a $35–$40 late fee and a 29.99% penalty APR on a major-bank credit card. If payday is still a week away, a targeted advance such as a $500 loan no credit check can plug the gap and keep the account from rolling to 60 days overdue. Compare the total repayment cost—including origination and optional membership fees to the late-fee + interest spiral you’ll avoid. Always set up autopay so the advance is cleared the moment your paycheck lands.
Once an account hits 180 days past due, most creditors “charge it off,” sell the debt for pennies on the dollar, and you lose any goodwill points you might have earned with sporadic payments. If the balance is large, a 1000 dollar loan (often funded in 24 hours) can be the least expensive bridge to keep the debt in the pre-charge-off stage, protecting both your relationship with the original lender and any existing account perks (cash-back, intro APR, etc.).
If a court judgment or wage garnishment feels imminent, list assets you can liquidate within 48 hours (unused electronics, designer clothing, spare vehicle) and bundle those funds with gig-economy income. For the final gap, services geared to people who say i need cash today provide instant-decision lines of credit that you can draw only as needed interest accrues solely on the outstanding amount, not the limit. This strategy buys time to negotiate a lump-sum settlement at 40-60 ¢ on the dollar.
A settled account may still dampen your credit profile, but its impact shrinks each month you add positive data. Two low-friction tactics: (1) Ask the collector for a “pay for delete” letter in writing before you remit the final payment; (2) Open a starter installment product such as online loans for bad credit that keep utilization low (<20% of the original limit) and report automatically. Combine that with a secured credit card, and many borrowers see a 60-point rebound within six months.
How Debt Collection Impacts Your Credit and What You Can Do
AnnualCreditReport.com, note the “Date of First Delinquency,” and keep written proof of all payments. If you still need to pay but want to avoid another hard inquiry, consider no credit check loans that use alternative data (bank-account cash flow, bill-pay history) rather than your traditional score. Using a short-term loan to settle the balance in full can stop further score erosion and halt additional collection fees.
When a Consolidation Loan Beats Third-Party Negotiation Fees
Small, Fast Cash to Halt Late-Payment Fees
Covering a Critical Shortfall Before Charge-Off
Emergency Money Moves When Every Option Seems Closed
Rebuilding Your Score After a Settlement or Paid Collection
Get Our RSS 
Follow us on Twitter 
Like us on Facebook 
Circle us on Google+ 
EasyFinance Blog
Twitter
Facebook
Google+
LinkedIn
Email Subscriptions
Leave a Reply: