Debt collection is the process that starts when the borrowers miss the payments for a very long time. As a borrower, you might have been through a tough financial phase causing the missed payments. You have to pay off the debts regardless of the situation once it is sent to the collections.
It is time for a negotiation with the debt collector to create a repayment plan. Your credit ratings will not improve in an instant because of the missed payments in the past. But it will prevent a CCJ and default on history.
Here are some tips to manage the debt that has been transferred to collections.
Stop Ignoring the Debt
You are legally liable to repay the debts even if you cannot afford the instalments. Your ignorance towards their communication efforts may lead to some serious consequences. They can even start the process of repossession or start legal proceedings.
All these things will make the situation financially worse for you. Instead of ignoring, try to find the repayment solution. It will help you financially and psychologically.
Contact the Lender
Lenders try their best not to start the collection or repossession process. It is a lengthy process that costs them time, efforts, and money. They may offer you some deal or relaxed terms to get their money back without wasting the resources.
Many lenders sell the debts to collection companies to get some portion of the repayment. Now, you have to deal with those companies whose primary job is to make customers repay. It is recommended to contact the lender before the debt is sold to some other company.
Stop Collection Calls and Mails
During the communication with the collection agents, you can ask them to stop the threatening calls and mails. It will prevent the feeling of stress every morning while opening the mailbox or answering a phone call. A formal letter with the request may stop them from sending those mails.
Remember, the request will not stop them from reaching court for the debt repayment. They will contact the credit bureaus for the missed payments. In the end, they have the right to file a lawsuit to get the money back.
Get to an Agreement
Again, lenders want their money back with some interest added to it. You have the option to negotiate and come to a settlement with reduced overall interest on the payment. However, the settlement doesn’t look good on the credit history for future financial help.
Many private lenders offer flexible terms to help their borrowers during a financial crisis. Also, they may offer you a repayment holiday to start the repayment once the crisis is resolved. They are generally a better alternative to the credit union loans.
Ask Them to Behave Appropriately
You have certain rights that prevent debt collectors to behave according to their will. They cannot hurl abuses, play unfair, or be deceptive towards you. Even the threats are limited to a lawsuit or repossession of the collateral.
The lenders or debt collectors are not allowed to contact you after 9 PM or before 8 AM. Also, they cannot barge into your workplace or the office hours if your employers have a problem with it. You can contact the local authorities if the collectors are trying to bully you or breaking the law.
Hire a Lawyer
The collectors can reach the court if the negotiations don’t end with an agreement. The court will make an arrangement which both the parties have to agree. However, the judgement is extremely harmful to your credit history.
You should hire a lawyer to represent your side of the story. The lenders will no longer contact you regarding the case or repayment. There is a bright chance that the lawyer and collectors create an agreement to avoid a CCJ.
Consider Help from Advisors
A financial advisor might help you with the repayment by creating a budget. They understand your financial condition well and use their expertise to put things back on track. You can ask the financial advisor to negotiate on your behalf.
Take Debt Consolidation Loan
You can contact a private lender for a debt consolidation loan to repay the current debts. The new debt will have lower interest rates and preferred terms to reduce the stress on the budget. The eligibility is based on the repayment ability, not credit history.
Banks and other financial institutions have stringent policies while approving the loan. You may find it extremely hard to get approval from them. Which makes debt consolidation loan from private lenders a better alternative to the personal and credit union loans.
To sum up, you still have some options to make the repayment after the account is sent to collection. There is no need to panic or stress about the situation. It is time to work on the repayment plan by starting the negotiation with the lender.
In this blog, some tips are mentioned for the borrowers whose profiles have been transferred to the debt collections by the lenders because of missed payments.