The average American family has a debt of at least $6,270. Some families could have much more than that owing depending on how much credit and loans they’ve borrowed. Even then, it can be stressful trying to pay those debts when you have too many creditors. Should you pay off a debt in collections? Read on to see if you should and tips on how to deal with debt collection agencies.
Accounts in collections
When you don’t pay off your debts, it goes to collections. This means that it can and will negatively affect your credit score. Even after you’ve paid off your debts in collections, it can stay on the report for years. However, the good news is, your credit score will go up over time after the account has been paid in full. Otherwise you’ll have to wait 6-7 years for the accounts to fall off your credit report.
If you feel you’re struggling with the debt collection agencies, you are not alone. You can learn more about Real Time Resolutions as they’re one of the debt collection agencies in the US. You can, of course, try to negotiate with a debt with them or you can go through a debt settlement program.
What happens if you don’t pay off your debts?
If your debts are not paid off, debt collection agencies can garnish your wages. A demerit will also appear on your credit report. With that said, it’s always a good idea to pay your debts if you can to avoid situations like this.
How to pay off the debts in collections
Of course, the easiest way is just letting it sit there for 6-7 years. But that’s 6-7 years that you won’t be able to get new credit because it affects your credit for that long. Here are some tactics for paying off your debts.
Pay in full
If you have the funds and arrangements have been made with a debt collection agency, paying in full is always a good idea. Sometimes it may be difficult to get the funds required to pay it off in full, so this may not be the workable option for everyone.
Create a payment plan
Sometimes you can negotiate a payment plan with a debt collection agency. If they agree to it, you can start paying off what you’ve agreed to every month. You can do this yourself or do this through a debt repayment program. Either way, you’re showing good faith that you’re paying off your debts.
Settle your debts
Sometimes an agency may allow you to settle your debt for a lower cost than your debts. But it usually happens if your debt is large and has been in collections for a long time. If you choose to go this route, make sure you get the agreement in writing. While you technically paid off what the debtor wanted you to pay off, it won’t be the greatest thing on your credit report as paying in full would be. The reason is that it’ll tell future lenders that you may have trouble paying back.
As you see from above, there are good reasons you should pay off your debts. Ignoring your debts can get you in legal trouble and it can garnish your wages. If you need help managing your finances, you can go to a credit counseling resource near you. Should you pay off a debt in collection agency? The answer will always be yes, as it can affect your credit profile. When it’s all paid off, you will get a clean slate and rebuild your credit again.