Debt can be an incredibly frustrating and seemingly debilitating aspect of life at times. Just when you think you are about to get your head above the water, it seems that something else happens requiring you to take on even more debt. As that debt continues to pile up it becomes harder and harder to remedy it until many just give up altogether. Many assume they are destined for a life of poor credit and cash purchases, with collection calls a part of their daily existence. Fortunately, it doesn’t have to be this way. Once debts are in collection, the real negotiating begins and the process of rebuilding not only your credit but your life starts.
What most people don’t realize about collection companies is that many of them aren’t just working on behalf of another company that you owe a debt to. Many of these collection companies have actually purchased your debt directly from the company that you owed it to along with all of the details and transcripts. They then use these details in order to assure you that they know about your account and know everything about it. What they don’t tell you is that they have most likely purchased your debt for pennies on the dollar.
This means a typical debt of $500 may have only cost the collection agency $50 to obtain. The idea for many companies is that some money is better than no money, so by selling the debt they are able to eliminate it from their books and save the expense of collecting on it further. Knowing this key detail can give you a huge upper hand in working with collection agencies in order to lower you debt.
Once you have accounts in collections, it is important that you take the number of accounts that you have into consideration. These accounts could sit in collections for years, decades even without any impact except to your credit typically. Rarely do these companies move forward with attempts at wage garnishment as the cost to reward is typically too high. This gives you time on your side. If you have multiple companies that are coming after you, don’t try to work with all of them at the same time. Simply pay off one at a time. The reason for this is that you can negotiate better deals when you are doing payment in full. So rather than paying 5 companies $100/month each, you can payoff big debts for that same $500 that you are spending.
To negotiate with the credit card companies you can’t let them know how much money you really have. Ask them how much the debt is, tell them that you will give them an amount which is a 60% discount from what you technically owe. So if your balance is $500, tell them that you are going to give them $200 for it. Let them know that you have several companies that you are working with and that you are going to pay the companies willing to work with you. This may require some further approval for obvious reasons but many times the company is either going to accept your offer outright or they’ll counter.
If they come back with an offer that is less than a 50% discount, let them know that you have other companies offering a 60% discount so you’re going to work with them unless the company you are speaking with is able to do that and then you’ll pay them immediately. In most cases the collection agency is going to accept this so that they can get you off of their books and get their money.
Keep in mind they are making a huge profit even on a 60% reduction. Many companies will even go straight to 60% off so they can get the payment faster. It all depends on the culture of the company you are dealing with. The key is prioritizing your debts so that you are paying off the highest percentage discounts first, making the others sweat it out a bit in hopes they will make a better offer by the time you get to them.
After you make your offer for a 60% discount it is important to stay firm in your offer. When the company calls you again let them know they are your lowest priority until you have all other debts paid off. Tell them that they could become a higher priority if they accept your payoff offer. By staying firm in each phone call and not letting them take back control of the negotiating you are forcing them to make a managerial decision that should be favorable to you. Even if they ultimately win the battle long term, this allows you to negotiate better on the majority of your debts so that you come out of it faster, spending less. This is the ultimate goal.
If you stay strong and keep calm you are going to fair much better in the negotiating process than you would if you freak out on the collection agency. Force them to make you an offer. You have time on your side, they don’t. Sure it was your debt and your responsibility, but with current consumer laws it makes it very easy to take back control of the situation and turn a huge negative in your life into a positive reversal if you are patient. The moment you give back control of the negotiating to the collection agency is the moment your debt starts costing you considerably more than it should.