Should You Ever Pay a Debt Collection Agency?

You want to know the truth because you’ve heard that paying a debt collection agency is never a good idea. What happens if collections are never paid? Should you pay the original creditor or the debt collector?

Numerous shady strategies might be used by debt collecting firms. They could begin with obnoxious phone calls and progress from there. However, based on your circumstances, you might never have to provide money to a debt collector.

Collection Agencies For Debt Purchase From Lenders

In debt collection situations, there are often two sides. The “debtor” is the person or entity who is purported to owe money. Then there is the party who is purportedly due the money. The “creditor” is the name given to this party.

A lender frequently discovers that they are unable to recover a loan from a borrower. The borrower’s loan’s interest keeps accruing, but there isn’t any income to cover it. Currently, a lender has two options:

  • Collect the bill on your own. Finding a potential debtor, though, might cause the lender more trouble than it’s worth.
  • Offer it to a collection company. Lenders still get paid while giving up the ability to recover the loan. This aids in the partial recovery of losses for lenders.

A business that purchases overdue debt from a creditor is known as a debt collection agency. These debts are typically purchased by debt collection companies for pennies on the dollar. Then they make an effort to find a debtor and make them pay.

These businesses are more prepared to recover the outstanding debt than lenders since they specialize in finding putative debtors. The world’s finest search engine, the internet, is used by their little army of sleuths. The chances are against an alleged debtor, who has no chance. Debt collectors may find their prey by utilizing everything, including voting records, bank information, and even internet service providers!

Whether you pay off your debts or not, they might still cause issues.

It can seem logical to just pay off a debt collecting agency at first. That is, after all, the simplest method to get them to leave you alone.

Not quite. Yes, you might be able to get a debt collector off your back by paying them. But it’ll only accomplish that. For an additional seven years, your credit record will still contain evidence of the unpaid obligation. It doesn’t matter how much debt there is in total. Whether the loan is for $100 or $100,000, collections raise the same cautionary flag on your credit report. Your future capacity to get loans may be impacted by this.

What’s worse, in debt collection proceedings, the intent is irrelevant. Most debtors don’t attempt to avoid paying their creditors. They just are unaware that they owe money. This occurs frequently. A borrower’s previous address may get a notification of overdue debt from a creditor. The borrower never receives it and continues living their life without realizing that the debt is still pursuing them.

This unpaid debt might have some unexpected consequences. It will make applying for new loans more challenging. With negative credit, getting finance for a car, house, school loans, or home improvements is much more challenging. That’s not all, though. Additionally, having bad credit might make it challenging to rent a house or even get an internet streaming account.

Paying a past-due loan to a debt collection company, however, will damage your credit report. Yes, you heard correctly. Even repaying debts might have a negative effect on your credit score if it appears on your credit report. It’s better for your credit report if you don’t make payments on previous loans that are still unpaid that are more than a year or two old.

How to Choose Whether to Pay a Debt Collection Company

In a situation involving debt collection, there is no “silver bullet.” While choosing to ignore a debt collector may be a choice in some circumstances, it may not be an option for all debtors.

Here are a few overarching ideas.

  • A debt collection firm may bring legal action against you if you refuse to pay. Suing to collect a debt is a serious matter. They won’t just go away by themselves if you ignore them. If a debt collector sends you a complaint, you have a certain amount of time to react, as set down by your jurisdiction. That time window is between 14 and 30 days for the majority of the US.
  • A debt collecting company has a number of possibilities if they prevail in court. To recover a debt, for instance, debt collectors may garnish wages. A court order known as a garnishment deducts money right away from a debtor’s income. This cash is used to pay off the debt they owe. Before disregarding a debt collector’s request for payment, take into account this potential result.

One other item to consider is this. As time goes by, interest on your unpaid debt will keep accruing. The amount of money you purportedly owe will keep rising if you don’t pay a debt collection agency.

Sometimes it makes sense to pay a debt collecting company. Keep in mind that these organizations only pay cents for debt. As a consequence, you could be able to settle your debt for a lot less money than what you owe. You could receive a letter from a debt collector confirming that your debt has been paid. This letter can be used to get the debt collection information off of your credit report.

A word of advice: pay the appropriate individual. Do your homework if a debt collector sends you a letter requesting money. Collection companies frequently trade debt with one another. Never presume that you are paying the appropriate debt collector. Verify to see if your debt has been transferred.

Consider paying a collection agency:

  • if the agency owns the debt and you are fully obligated to pay it.
  • If you have the funds and want to settle the issue as soon as feasible.
  • If you feel that you have a moral obligation to repay debts whether or not they are really owed.

Most individuals agree that it makes sense to negotiate a settlement. If you are being pursued by a debt collector, they are likely adding hundreds or thousands of dollars in fees on the amount. Additionally, they presumably paid just around 10% of the debt’s face value when they purchased it. These considerations imply that you would be overpaying if you gave them the total amount they are requesting.

On the other side, if you don’t settle the loan eventually, they could harass you indefinitely. Even if the statute of limitations has passed and they are unable to obtain a judgment against you, they are still permitted to continue pursuing you for payment or selling your debt to the next person indefinitely. Alternatively, it may end up on the list of some thug who threatens your life on the street.

The greatest strategy for securing a modest settlement is to use the Debt Validation Letter and Answer defense. Once the settlement has been paid, you will receive proof that the action has been dismissed with prejudice and that a complete and final settlement has been reached. The debt is then paid in full.

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