Getting Collection Agencies To Settle For Less
Trying to collect payment on debts sent to collection can quickly become counterproductive because of the costs involved. Once the costs start adding up, collection agencies who initially insisted on full payment, quickly become more open to negotiation – especially since the alternative is to simply write off the debt When this happens, you may be in a position to bargain for a lower payoff on your debt.
Collection agencies are often satisfied to settle your debt for whatever you can offer them. The reason being, they usually only get to keep a percentage of what’s collected. To maximize their overall return, they need to collect as much as they can, as fast as they can. Since their motivation is to get matters settled as quickly as possible, negotiating a lump sum payment, rather than installments, will go over much better.
Understand that the collection agency will always try to get more than you are offering, so be prepared to bargain. Make your initial offer in the range of 40% of your original debt and see what they counter with. Your bargaining power is greatest prior to payment, so negotiate the removal of related negative data from your credit report at the same time, maybe in lieu of a slightly higher payoff.
One caveat. Only offer to pay what you can actually afford whether it be all at once, or in installments. You want this matter to be finally laid to rest, without perpetuating further financial hardship. Also, never reveal the source of the payoff money. A collection agency that thinks you have access to more money, will push for a higher payoff amount.
Once you’ve reached an agreement, get everything in writing. Be sure to include the stipulation about removing the negative data from your credit report and that your entire debt be retired in exchange for the settled upon amount. Use either a cashier’s check or money order to issue payment (they won’t take your check!). If your only alternative is to use cash, be sure to get a receipt. Plan to retain all related documents at least four years.
Collection agencies have strong motivation to get your money and get it quick. This gives you some useful leverage when negotiating a debt settlement. Making use of your bargaining power can enable you to negotiate a better settlement and start you on the road to cleaning up your credit report.
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