Dealing With A Debt Collector

debt collector

Think of a debt collector and a large man with a baseball bat knocking on your door comes to mind. In reality, they are more likely to harass you over the phone and via email than making the trip to your house. The latter is too expensive these days unless, of course, they are coming to seize your vehicle or property.

How Does The Debt Collection Process Start?

The process of debt collection starts when you miss repayments on your debts. By defaulting, you trigger an internal process put together by the bank or credit provider that you borrowed money from. If it is your first time missing a payment, you may get a kind courtesy call as a gentle reminder. After many missed payments the tone will start to become a lot more serious, and even become threatening.

When Does Your Debt Get Handed Over To A Debt Collector?

Banks and credit provider have their own in-house payment collection teams. They will be the ones chasing up on the first few missed payments. A credit provider will exhaust all internal options, after which your account may get handed over to a debt collector or debt collection agency.

Sometimes it is cheaper and easier for a credit provider to hand the account over to a debt collectors than to follow the legal action route. If the debt in question is old, you should also make sure that it has not already prescribed.

Debt collectors get paid by the credit provider or actually take over the debt itself. The primary role of a debt collector is self explanatory, to collect debts. The more they collect, the more profitable they are. In the past, debt collectors had come up with interesting, and sometimes immoral ways to collect debt, such as threats. With a better Consumer Protection Act, it is risky for debt collectors to use these types of tactics.

What To Do If Debt Collectors Are Contacting You?

If you are getting contacted by debt collectors chances are you’re in a bit of financial trouble, if not, it is best to pay up all outstanding repayments and make sure you stay up to date. If you think you are going to start missing debt repayments, the best thing you can do is act early. Don’t wait before it is too late.

Contact your credit providers and the banks and let them know that you are running into some financial trouble. Often you’ll be able to come up with a temporary arrangement with them to give you a few months grace or a reduced monthly payment until you’re back on your feet.

It is important to note that this is an informal arrangement. At ay time the bank has the right to ask for all short-payments to be settled in full. If you are in need of a more permanent solution, it is best to contact a debt counsellor. A debt counsellor will have a look at your financial situation. By gathering information such as your monthly living costs and total debts, they can advise you correctly.

For consumers that are over-indebted, meaning that their income is not enough to cover all debts and living costs, debt counselling is usually the best solution. Debt counselling assists consumers by restructuring their debts into one, simple, affordable debt repayments. Your debt repayments could be reduced by 60-70%. Debt counselling also assists the consumer by reducing interest rates and fees. The process also prohibits the consumer from making out anymore debt, which helps with the rehabilitation and makes sure the problem doesn’t get any worse.

How Is My Credit Score Affected?

If you miss or make late repayments, your credit score gets damaged . A good credit score is important for further credit access as well as to obtain better interest rates. Your credit score and history also gets scrutinised when you apply for vehicle finance or a home loan, so it is best to make sure you keep it as high as possible.


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