This is a guest post from Rachel, a reader with experience as a collections agent. She graciously agreed to post some tips for dealing with your creditors when you’re having trouble paying your bills. Please treat her with kindness and respect, and check out her brand new blog, Whimsical Melange.
My experience is with auto collections, but most of my tips and information will apply to any simple interest loan.
Answer the Phone
You don’t want to talk to us. We aren’t surprised. The calls are not some sort of torture device (most of the time).
This is why you should answer the phone: We can’t call you back. Once you answer the phone and identify yourself as the account holder, we cannot call you back the same day according to the Fair Debt Collection Practices Act. If we do, please save the evidence. Sue the pants off the company. Easy way to get rid of debt!
Also, if you stay in contact with us, we won’t have to start tracing you. We start this immediately once we are unable to make contact. We have caller ID, so we’ll call you back on whatever number you called us from. We’ll call the references you listed on your application and try to reach you at your employer. If we still can’t reach you, we’ll call relatives you didn’t list and possibly even your neighbors to see if they know you. If you talk to us when we call, we have no reason to do this.
If you just can’t stand the collection calls, write a letter stating that you don’t want to be contacted by phone regarding your account, ever. Send it certified and keep the records. If you get another phone call, sue. Once you’ve sent a letter, though, the communications ball is in your court. We will not contact you for payment or to offer options to help you bring the account current. You’ll have to contact us, and when you do, we tend to be less flexible. After all, we haven’t heard from you – what do you expect?
You don’t have to give us all the gory details about why you can’t make your payment. I will ask you why you’re late because I have to meet certain guidelines on every call – keep your answer short and sweet. Hearing why you can’t make your payment isn’t my idea of a good time; if I need more information, I’ll ask. If you give me some long, complicated excuse, I may not believe you, but I’m likely to give you the benefit of the doubt. Don’t test my credibility. Anytime I catch you in a lie, I’ll make a note of it.
When you set up a payment arrangement, don’t break it. There will be a record on your account. If the notes on your account indicate dishonesty, we are more likely to take action early in your delinquency. If you’re upfront the whole time, it benefits you in the long run.
Know Your Fees
Most people buying a car will only face late fees if they can’t pay – make sure you know when this fee is assessed and how it is calculated. Some states require a flat fee; others allow a percentage. This information is readily available in the contract you signed when you took out the loan (in the fine print that you may or may not have read). Most of the people who get to me (more than 30 days past due) have never looked at their contracts.
If you’re leasing a vehicle, be prepared for a whole new world of fees. Sometimes the property taxes are assessed to the company providing financing, since they technically own the car. You have to pay it back. Also, if you get a parking ticket and don’t pay it, the finance company will have to pay that as well. They will pass it back to you along with additional fees for their trouble. Same thing with impound fees, which can go on your credit report as a repossession even if you’re not behind on your payments. You can argue about these types of fees until you’re blue in the face, but it will do you no good. They’re all in the lease agreement.
ANY Late Payment Costs You Money
If you make a late payment at the beginning of a loan, it really hurts you and you’ll pay more interest over the life of the loan. On the bright side, if you pay extra on your first few payments, you will greatly reduce the total amount of interest you pay. Make sure that any extra money you send will be applied to principle.
If you can’t make your payment, you may be able to get an extension. This extends the term of your loan by one month and allows you to “skip” a payment during the loan term. Instead of a 60-month loan, for example, you would now have a 61-month loan with only 60 payments required. This is a great way to catch up as long as you use it wisely. If you pay the interest owed on the date of the extension, you’ll be able to pay off your loan on time with minimal added interest.
DO NOT use an extension during the first 12 months of your loan. If you don’t pay the interest on the loan for 2 months, it could easily add up to the amount of your regular payment. Ouch! This is especially true for loans with high interest rates.
We Don’t Want Your Car Back (Most of the Time)
We would rather work with you to bring your payments current than take the car back, unless you’ve irritated us by lying to us. Your car is likely worth several thousand dollars more than you owe on it. Plus repossessions cost your finance company an average of $10k-$12k each. Obviously this is a bad business decision!
When you pay late, we make a ton of money. All we want to do is limit our risk. If you don’t irritate the collector assigned to your account, you’ll likely be able to keep your vehicle even with late payments.
If you know you absolutely can’t pay for your car, call us. Make arrangements to surrender the car voluntarily. It doesn’t look any better on your credit report, but it can save you about $500. Hiding the car is dumb. We’ll likely find it. If we can’t, a judge will order you to produce it. More of your money down the drain. All our court costs are passed to you, along with any fines imposed by the judge.
The Bottom Line
Keep in mind, you’re dealing with a person who has a job to do, which is to collect your money. Collection agents need to pay our bills just like you do. We have to follow policy even if they don’t agree with it. Be polite. Be honest. Don’t try to outsmart us. It will come back to haunt you.
Ask for the help you need. All we can do is say no. Don’t take it personally. We do not enjoy causing you pain or messing up your life.
Andrea’s note: I have not had pleasant experiences with bill collectors in the past. However, reading this post helps me understand their perspective a little better. Rachel has given us some ways to avoid being harassed by collection agents, as well some great tips on what to do if you’re having trouble making your loan payments. Did you learn anything new? Anything you still have questions about? Let us know!