Finance companies attempt to get payment from defaulting customers, but regularly fail to achieve this. Customers may have gone missing, moved house or are just being difficult. They all present a problem and become uneconomical to collect. The debt is sold on and the remainder is simply written off against taxes.
How Do Debt Collection Agencies Make Money?
This uncollectible debt is purchased for 10-20% of the loan value by debt management companies. A £10,000 loan will often be bought for as little as £1,500 and they will then pursue you relentlessly for full repayment. What you pay is their profit.
How Can You Utilise This Knowledge?
If you have savings or can borrow money you have an excellent chance of being able to reach a full and final settlement with the debt collection agency. It is possible that you could settle your loan for 35% of the remaining sum. If you have access to cash, ask them for a settlement figure.
The Threat of Debt Collectors
You will receive countless threatening letters from debt collection agencies advising you that if you don’t pay the balance in full a debt collector will be paying a visit. What they don’t say is that the person is only allowed into your home if you let them in.
How Do You Deal with Them?
Unless a debt collector has a court order they are not allowed to force entry to your home. If you don’t open the door or leave easily accessible windows open they can’t get in. If you open the door, they may put their foot there and by then it is too late.
If a debt collector is able to gain entry they can make a list of items of value in your home and can arrange to sell them if you don’t make payment. If you don’t let them in they cannot do this.
If you have at least £100 per month to offer your creditors, you may wish to consider a Debt Management Plan. You would no longer have to deal with the creditors directly. There is also a strong possibility that interest and any charges will be frozen.
If you have multiple creditors and your debt levels are high you should talk to a debt advisor to see whether bankruptcy or an Individual Voluntary Arrangement are the right option. Both of these methods do provide light at the end of the tunnel.