A debt collection company is a company or agency that works to recover money in debt accounts. Many debt collection companies are hired by companies to which debtors owe money, who work for a fee or for a percentage of the total amount. Some debt collection companies are debt buyers; these companies buy debt at a fraction of their nominal value and then try to recover the entire debt amount.
A borrower who cannot settle his debts
Or fail to make the scheduled payments on a loan will have his / her negligence reported to the credit bureau. Not only will his credit history be affected, but his debt will be transferred to a collection agency or collection company within three to six months of the due date.
Overdue payments on credit card balances, telephone bills, car loan payments, bills, and withholding taxes are examples of overdue bills that a collection company may have the task of collecting.
The companies find it cheaper to get a debt collection company to recover unpaid debts than to chase customers themselves. The debt collection company has the tools and resources needed to track a debtor, whether they have changed their home or telephone number. These agents also perform several strategies such as calling the debtor’s personal phone and work phone and even showing up at the individual’s door now and then to get the debtor to pay his balance.
Collecting agents can also contact family members
Friends and neighbors of the borrower to confirm the contact information they have on the file for the individual, but they cannot disclose the reason for trying to reach the person. An agent can choose to send delayed payment notifications to the debtor as well. However, the debt collection companies ensure that the debtor has their full attention.
If the individual changes and pays his debt, the creditor pays the debt collection company a percentage of the funds or assets that the agency has recovered. Depending on the contractual agreement entered into with the original creditor, the debtor may have to pay the entire debt at one time or only part of the debt at a time.
However, if the borrower still does not cover his overdue account, the collector can update the borrower’s credit report with a “debt collection” status. To have this status on a credit report is certainly to reduce the individual’s credit score. A low credit rating will affect the chances of obtaining a long-term loan, especially as an account under debt collection can remain on a credit report for seven years.
A debt collection company
It would be in breach of regulations if they continue to collect old debts that have been counted as non-recoverable. An account that cannot be withdrawn is one that has no chance of being paid off because the borrower has filed for bankruptcy or cannot be located. In addition, unless a debt collection company has won a lawsuit against a debtor, it cannot legally resort to assets from a debtor or physically harm or threaten a debtor to make payment.
In the end, we would advise you never to take additional loans to pay off old ones. This often leads to a vicious cycle of high-interest rates that are only based on one another. Therefore, it is important that you weigh the pros and cons before taking out a loan.